What is current beta on mmes common stock

Assignment Help Financial Management

Reference no: EM132047475

Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt and 65% equity. MME's debt currently has a 7.3% yield to maturity. The risk-free rate (rRF) is 5.3%, and the market risk premium (rM – rRF) is 6.3%. Using the CAPM, MME estimates that its cost of equity is currently 11.5%. The company has a 40% tax rate.

a. What is MME's current WACC? Round your answer to 2 decimal places. Do not round intermediate calculations.

b. What is the current beta on MME's common stock? Round your answer to 4 decimal places. Do not round intermediate calculations.

c. What would MME's beta be if the company had no debt in its capital structure? (That is, what is MME's unlevered beta, bU?) Round your answer to 4 decimal places. Do not round intermediate calculations.

MME's financial staff is considering changing its capital structure to 45% debt and 55% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 7.8%. The proposed change will have no effect on the company's tax rate.

d. What would be the company's new cost of equity if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations.

e. What would be the company's new WACC if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations.

Reference no: EM132047475

Questions Cloud

How each of the two management styles selected : Explain how these differences could align or be dissonant with the organization's culture and the advantages or disadvantages of that dynamic

Discuss in sentence the relevance of historic-industry : Discuss in a sentence the relevance of historic, industry, competitive, and market benchmarking with respect to financial ratios

Determine break-even point in sales dollars : Annual fixed costs are $120,000 and Variable costs are 40 percent of sales revenue. Determine break-even point in sales dollars

What is altruistic and compliant sex : What kinds of rapes occur more frequently? Which ones are most likely to be reported? What is altruistic and compliant sex? Summarize rape statistics.

What is current beta on mmes common stock : What is the current beta on MME's common stock? What would be the company's new cost of equity if it adopted the proposed change in capital structure?

Define the hfacs model : Explain, define the HFACS model. How is this model applied in the management of human error?

What about gays and lesbians in the military : Discuss the connections between the military and the economic system as well as the political and governmental institutions of the state.

Prepare a partial income statement : On December 31, 2016, the company's fiscal year-end, Prepare a partial income statement for 2016 beginning with income from continuing operation

Potential actionable recommendations for each of element : Outlining in turn two generalized examples of potential actionable recommendations for each of the elements.

User Account

All Pages