What is the cost of capital of debt

Assignment Help Business Management
Reference no: EM131434052

You expect your ?rm to be worth $50, $100, or $120 with prob-abilities 1/10, 6/10 and 3/10, respectively.You can raise $75 in debt proceeds todayif you promise an interest rate of 10%. Under this ?nancing plan, your cost of equitycapital is 20%.

1. What is the cost of capital of this debt?

2. What is the value of your equity? What is the value of your ?rm?

3. If you raise $50 in debt proceeds today, your friendly investment-banker tells you that you can get away promising an interest rate of 3%. What is your debtcost of capital in this case?

Reference no: EM131434052

Questions Cloud

Machine learning to help customers select products : Amazon uses machine learning to help customers select products. Can this technology increase or decrease supply? Please explain using examples. Does this technology affect prices?
Discuss the samsung brand itself and compare with sony : Discuss the Samsung brand itself and compare with Sony or any other brand you think it is the major competitor for Samsung.Provide your suggestions of the future of Samsung in the 4Ps locally and internationally.
Interest rates using supply and demand curves : Please explain the price of bonds and interest rates using supply and demand curves. Using supply and demand curves, draw curves before and after movement, please explain how rates are determined if the supply curve moves right or left.
Describe any serious problems you encountered : Describe any serious problems you encountered. List any Other comments here. Feel free to provide any feedback on how much you learned from doing the assignment, and whether you enjoyed doing it.
What is the cost of capital of debt : 1. What is the cost of capital of this debt? 2. What is the value of your equity? What is the value of your ?rm?
Are the arguments being forwarded cogent : Summarize the advertisement, the apparent demographic it is aimed at, and the product it is pitching and what are the arguments being made? Are they explicit or only implied?
Income velocity of money doubles : Then suppose that the Fed cuts the money supply in half but the income velocity of money doubles. Calculate the price level after all these changes have taken place?
Reflect on your thought process throughout assignment : Reflect on your thought process throughout this assignment. What have you learned and what could you do differently next time you are confronted with a similar dilemma?
Who is responsible for protecting the environment : AURAEA3003 Monitor environmental and sustainability best practice in the automotive mechanical industry Written Test Assignment. Who is responsible for protecting the environment? What is the federal body responsible for setting national standards on..

Reviews

Write a Review

Business Management Questions & Answers

  Sole proprietorship-partnership and a corporation

Problem: What is the difference between sole proprietorship, partnership, and a corporation?

  Find the managers optimal contract offer

Solve the game under the assumption that a is common knowledge between the worker and the manager. That is, find the manager's optimal contract offer. Is the outcome efficient?

  What is the null hypothesis for your question

What is your research question? - What is the null hypothesis for your question? - What research design would align with this question?

  How work events impact job satisfaction and job performance

Describe the affective events theory and explain how work events impact job satisfaction and job performance. Describe how you might use emotional intelligence to control mood and create a positive work environment in your branch.

  Talent management system attracting and retaining the

talent management system attracting and retaining the bestthe case scenariowhat is the definition of talent management?

  Management usually adapts certain values

A company's culture evolves from its core values and its ethical standards. A company's commitment to certain values and belief in proper behavior is the basis upon which a company operates. Management usually adapts certain values and ethical standa..

  Question about brand image

Brand image is one way a firm can differentiate its good or service. However, many questions are now being raised about the effect brand images have on consumer behavior.

  Research testing reliability and validity1 should an

research testing reliability and validity1. should an organization create research testing for all problems confronting

  What are some advantages and disadvantages of shell matrix

What are some advantages and disadvantages of the Shell Matrix? Why do you think Shell has undergone so many organizationalrestructurings? How would you decide what would be Shell's best organizational structure?

  Organizational culture and organizational change

Please answer the following discussion questions with 80 or more words 1. How are organizational culture and organizational change interrelated?

  Swimming than on biking or running

Rajiv has an incentive to spend more time on swimming than on biking or running. Rajiv can use time most efficiently by spending the same amounts of time on swimming, biking, and running. People usually exploit opportunities to make themselves bet..

  What competitive advantage can the companies described

1.What competitive advantage can the companies described in the case derive from the useof faster technology and co-location of servers with the exchanges? Which would you sayare sustainable and which ones temporary or easily imitable? Justify..

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