User Account

All Pages

The asset beta for firms in the same industry code

Assignment Help Financial Management
Reference no: EM13327825

Find the WACC for a firm with the following characteristics. A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of $3,500,000. The firm has 1,000,000 common shares outstanding at a value of $6/share. You look up the asset beta for firms in the same industry (SIC) code and determine that value is 1.15. The firm plans on keeping its D/E ratio constant (at the current level) going forward and the tax rate is expected to be 35%. The beta of the firm's debt is estimated as 0.10, the risk free rate is 3% and the market return is 9.8%.

Reference no: EM13327825

Questions Cloud

Tool intended purely for social engagement : Social media may have begun, as its namesake implies, as a tool intended purely for social engagement, but the commercial value soon became apparent and it has become the marketer’s new best friend too.
Despite the potential fallbacks of social media : Despite the potential fallbacks of social media, it is easy to see why it is increasingly overtaking traditional forms of marketing. Take television commercials for example, they can cost millions;
Calculate the weighted average cost of capital : Calculate the weighted average cost of capital (WACC) for existing capital
Calculate the project and equity free cash flows : Calculate the Project and Equity Free Cash Flows for the following scenario
The asset beta for firms in the same industry code : The asset beta for firms in the same industry (SIC) code and determine that value is 1.15. The firm plans on keeping its D/E ratio constant (at the current level) going forward and the tax rate is expected to be 35%. The beta of the firm's de..
Provide internal audit service : Sole proprietor in pulic practice, plans to establish a separate department that will provide internal audit service to his audit clients.
Define the ph at the half-neutralization point : The volume of HI(aq) required to reach the equivalence point : (1c) The pH at the half-neutralization point. (1d)The pH at the equivalence point.
Discuss the power of rituals in our interactions with others : Discuss the power of rituals in our interactions with others? How do these rituals create meaning for us and others?
Define hi required to reach the equivalence point : The volume of HI(aq) required to reach the equivalence point : (c) The pH at the half-neutralization point. d)The pH at the equivalence point

Reviews

Write a Review

Financial Management Questions & Answers

  Explain a reasonable strategy for bond investors

Suppose interest rates have been at historically high levels the past two years and you therefore expect they will soon go down. A reasonable strategy for bond investors during this time period would be to

  Explain what happens to the market rate of interest

the market rate of interest will sell for a discount and that a vanilla bond which has a coupon rate above the market rate of interest will see for a premium. What kind of bond or loan will sell at its par value regardless of what happens to the m..

  Minority shareholders

Comment on the following quote:"... agency problems do not mean that the corporate firm will not act in the best interest of shareholders, only that is costly to make it do so. However, agency problems can never be perfectly solved ..."

  Comparing the alternatives and tradeoffs

In your readings you were shown sources where decision tools can be found. Please refer to the "What is a Decision?" lecture and select "Click to Explore." In the list provided, you will notice paired comparison analaysis. Select and read about this ..

  How much would you be willing to pay for this security

Suppose that one year has elapsed, you have received the first payment of $600, and the market interset rate is still 5 percent. How much would another investor be willing to pay for your security?

  Whats wrong with using payback period

How can options sell for more than their exercise value and whats wrong with using payback period? What should we use instead? Why?

  Explain understanding of international finance at a point

Reflect on your understanding of International Finance at this point. What are some topics you currently find difficult to comprehend? What areas of this course do you find more engaging and interesting?

  How does a current account deficit benefit u.s. citizens

What is a current account deficit? Specifically, what does it mean that the U.S. isrunning a current account deficit? How does a current account deficit benefit U.S. citizens? Howdoes a current account deficit hurt U.S. citizens?

  Explain the current yield offered by each preferred stock

What is the current yield offered by each preferred stock? Why are the prices of these preferred stocks different even though they both pay the same dividend?

  What would have been her return in yen

Benjamin Pinkerton from New York invested in a U.S. two-year zero-coupon bond at the start of the period and sold it after one year. What was his return?

  Explain the payout policy of firms

Assess the growth of the firm in terms of its amount of total assets. Where have funds for growth come from? How does this relate to the firm's payout policy

  Prepare swag''s consolidated balance sheet

Prepare Swag's consolidated balance sheet under and prepare the consolidated financial statements for 20X3 using the direct method

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd