Cost of equity if the debt-to-equity ratio were zero

Assignment Help Financial Management

Reference no: EM131021003

A firm has a debt-to-equity ratio of 1. Its cost of equity is 16 percent and its pretax cost of debt is 8 percent. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were zero?

Reference no: EM131021003

Questions Cloud

Analysis you might perform in considering this use of funds : The head of the hearing department at your outpatient clinic wants to purchase a new state-of-the-art audiology diagnostic suite for $4000,000. You have been asked to review he request. What are some examples of the types of analysis you might perfor..

Prepare journal entries to record depreciation of machine : Prepare journal entries to record depreciation of the machine at December 31 - The year of its disposal.

Olympic sports has two issues of debt outstanding : Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $37 million, a maturity of 10 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with c..

About the percentage cost of the preferred stock : Pangbourne Whitchurch has preferred stock outstanding. The stock pays a dividend of $3 per share, and sells for $30. What is the percentage cost of the preferred stock? (Enter your answer as a whole percent.)

Cost of equity if the debt-to-equity ratio were zero : A firm has a debt-to-equity ratio of 1. Its cost of equity is 16 percent and its pretax cost of debt is 8 percent. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were zero?

What is days sales outstanding-average amount of receivables : Snider Industries sells on terms of 3/10, net 20. Total sales for the year are $1,724,500. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 68 days after their purchases. What is the days sales ou..

Prepare a monthly flexible budget : Prepare a monthly flexible budget for each $11,300 increment of sales within the relevant range for the year ending December 31, 2014

The project requires an initial acquisition cost : A domestic firm is considering a 8-year project. The project requires an initial acquisition cost of $2 mil and needs additional installation cost of $0.2 mil at the beginning of the project. Determine whether you will accept or reject this project u..

Why is limited liability more important for firms : Why is limited liability more important for firms trying to raise funds from a large number of investors than for firms trying to raise funds from a small number of investors?

User Account

All Pages