The cost of equity after debt is raised

Assignment Help Business Management
Reference no: EM133495661

A firm is solely financed by equity with market value of $50,000 and cost of equity of 10%. It wishes to raise another $30,000 via corporate bonds with cost of debt of 5% and use all of it to buy back outstanding equity (no cash holding). Hold investment policies fixed. In a MM world with tax rate of 40%,

The cost of equity after debt is raised is

The additional value created by debt is

The WACC after debt is raised is

Reference no: EM133495661

Questions Cloud

What is the value of firm equity at the end of year : A representative firm that has the same free cash flow growth as the GDP growth in Country X.What is the value of the firm's equity at the end of the year 2019?
Decided to sell new line of golf clubs : ZTX Co. has decided to sell a new line of golf clubs. The clubs will sell for $762 per set and have a variable cost of $372 per set.
Default risk premium : A Treasury bond that matures in 10 years has a yield of 7%. What is the default risk premium on the corporate bond?
Discuss what kind of exposure your company : Discuss what kind of exposure your company has. Does it matter to remain unhedged for this exposure?
The cost of equity after debt is raised : A firm is solely financed by equity with market value of $50,000 and cost of equity of 10%. The cost of equity after debt is raised is
Demand for additional funds : Your maintenance level is $5,000. At what settle price will you get a demand for additional funds to be posted?
Fair forward price specified in above forward contract : What is a fair forward price specified in the above forward contract to let its value be zero at initiation?
Explain deviations of the actual price from fair value : Is the actual price of put option equal to its fair value according to the put/call parity? What can explain deviations of the actual price from fair value?
Oregon statewide rent control law : Does an active residential rent control law make housing more affordable for more people

Reviews

Write a Review

Business Management Questions & Answers

  A potential deal structure

A potential deal structure?

  Calculate the slack for each activity

Image you are human resources professional at pure swing who has been assigned to develop program for recruiting new project managers. Design a job description for the position.

  Apply the porter force model

Need a SWOT matrix for a current place of work, or for an organization to which you belong. Apply the Porter's 5 force model to assess whether you believe your

  Master file of the system volume

You want to change the boot order of your laptop running Windows 8 so it will boot from a USB disk. Where can you reconfigure this?

  Managerial accounting concepts and principles

At this point, you have studied managerial accounting concepts and principles, job-order costing, process costing, ABC, cost behavior, and CVP analysis. Thinkin

  What is the net profit based on the best case scenario

1) If 10,000 ads are purchased, what is the optimal click response rate to earn a $5,000 net profit?

  Determining staffing needs

What is the primary factor in determining staffing needs?

  Business and leadership around the globe

Globalization has significantly influenced business and leadership around the globe. Even though the US has lead the business world for the last several decades

  The dollar change in value during the next year

The current spot exchange rate is S0¥/$ = ¥190/$ and the 1-year forward rate is F1¥/$ = ¥210/$. The prime rate in the United States is 15 percent.

  Competitive advantage with its weather-centric running

In your Introduction, discuss how TWC can be maintain its competitive advantage with its weather-centric running app now that public weather datasets are available. What other data could TWC incorporate into the OutSider app to make it the go-to r..

  Best predictor of team performance

Which of these two models do you think is the best predictor of team performance? Explain.

  Appointment with patient who is recovering from bronchitis

Dr Flores is a pulmonologist who just had a follow up appointment with a patient who is recovering from bronchitis.

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!

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