What is the company new cost of equity

Assignment Help Financial Management

Reference no: EM131176554

Pippi’s Puppies Inc. has an unlevered beta of 0.80. The firm currently has no debt, but is considering changing its capital structure to be 30% debt and 70% equity. Its corporate tax rate is 30%, r_RF = 4% and the market risk premium is 5%. What is the company’s new cost of equity? Please show work.

Reference no: EM131176554

Questions Cloud

Effects of the insolvency on company-shareholders : There has been a major global crisis, and your company’s board of directors has announced that the company is going bankrupt. No one could have seen this one coming. As your company’s controller, compose a summary report to your CEO advising him on t..

Calculate the annual return on the mutual funds : Suppose an individual invests $34,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.8 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating e..

What is the indifference point between the two strategies : Sam’s Smokehouse wants to recapitalize and repurchase shares. The company currently has 900 shares (and no debt), but is thinking about borrowing $9,000 at 10% per year and buying back 150 of those shares. What is the indifference point between the t..

Value of the call option embedded in the convertible bond : Conversion price $52/share Coupon rate 6.5% Par value $1,000 Yield on nonconvertible debentures of same quality 8.5% Maturity 25 years Market price of stock $42 /share 23. If the price of the convertible bond is $900, what is the value of the call op..

What is the company new cost of equity : Pippi’s Puppies Inc. has an unlevered beta of 0.80. The firm currently has no debt, but is considering changing its capital structure to be 30% debt and 70% equity. Its corporate tax rate is 30%, rRF = 4% and the market risk premium is 5%. What is th..

Financial intermediary is managing traditional pension fund : Suppose a financial intermediary is managing a traditional pension fund for a client. The client expects to pay an employee $500 at the beginning of each month for thirty years of their retirement. If the financial institution is able to average 6% r..

Share stock price be immediately after the distribution : The following data apply to Grullon-Ikenberry Inc. Value of operations $1000 Short – term investments $100 Debt $300 Number of shares 100 The company plans to distribute $50 as dividend payments. What will the intrinsic per share stock price be immed..

The alternatives from both financial and tax standpoint : Kathy Waterhouse has $750,000 to invest and has been approached with two alternatives. Since Kathy knows nothing about the world of “high finance” she has asked you to analyze these two alternatives. Today is January 1, 2015. Kathy is single and is i..

Representing tech marketing : Assume Michael, representing Tech Marketing, went to the bank to obtain a mortgage. The bank will present an interest rate that reflects their perception of the kind of credit risk Tech Marketing would present. What four questions do you think they m..

User Account

All Pages