What is the cost of equity

Assignment Help Business Economics
Reference no: EM133227502

Question

"Suppose you borrow $1000000 when financing a coffee shop which is valued at $1850000. You expect to generate a cash flow of $750000 at the end of the year. The cost of debt is 8%. What is the cost of equity? Note: Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05".

Reference no: EM133227502

Questions Cloud

Assume that immediately after natalie sells calendar spread : Assume that immediately after Natalie sells the calendar spread, the implied volatility of both the two month and the one month options go up by 1%.
Determine expected value and standard deviation : Determine the expected value and standard deviation of the famer's revenue from this sale in 180 days.
Liquidity-solvency and profitability ratios : Comment on Harley Davidson's last 3-year trends in the following liquidity, solvency, and profitability ratios:
Drawbacks or tradeoffs to using floating rate bonds : Are there any drawbacks or tradeoffs to using floating rate bonds? For instance, many hedging strategies require additional payments of some sort.
What is the cost of equity : "Suppose you borrow $1000000 when financing a coffee shop which is valued at $1850000. What is the cost of equity?
Capital budgeting case : Assume that the product life-cycle of seven years is viewed as a safe bet, but that the scale of demand for the product is highly uncertain.
Is emily over-spending or underspending : Which of Emily's expenses are fixed? Which are variable? Is Emily over-spending or underspending?
What is expected rate of return of the common stock : Dividends are expected to grow at a rate of 6% annually. What is the expected rate of return of the common stock?
Descriptions of financial challenges : Descriptions of the financial challenges in each of the following health care environments

Reviews

Write a Review

Business Economics Questions & Answers

  Class is intro to transportation management

What are the advantages and disadvantages of transporting product via pipeline? Research the web and supply the name, website, and the basic mission statement.

  What is the purpose of this type of legislation

A number of states have passed laws that require all Medical Doctors who work at Planned Parenthood Clinics to have admitting privileges at a nearby hospital. This MD's may or may not perform surgical procedures. In addition, some of these clinics ar..

  Calculate the equilibrium level of output in closed economy

The behavioral functions are given as follows. C = 20 + 0.8(Y − T); I = 14; G = 20; T = 10; IM = 0.5Y; X = 0.1Y*; Y* = 100where Y is domestic income; Y* is foreign income; C is consumption; T is tax; I is investment; G is government spending; IM is i..

  Annual net benefits of the computer system

Resale value of the computer is estimated at $5 000 at the end of its service life. If the MARR is 4%, what is the annual net benefits of the computer system?

  What was the annual compound interest rate

Suppose that you deposit $5,000 in a savings account. It has been 15 years and your current balance is $8,376.74. What was the annual compound interest rate?

  What will you pay for beecham stock today

If the equity cost of capital is 7%, what will you pay for Beecham's stock today?

  Price discrimination bad

What three conditions must hold for a firm to successfully price discriminate? What is the difference between price discrimination and other forms of discrimination? In your opinion, is price discrimination bad?

  Calculate the accounting profit for pottery firm

Gomez runs a small pottery firm. He hires one helper at $14,500 per year, pays annual rent of $7,500 for his shop, and spends $18,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) t..

  Identify revenue sources and expenditures

Identify three revenue sources and three expenditures for that agency. The impact of the expenditures on the revenue source

  Find consumer surplus-producer surplus-deadweight loss

What is quantity traded? What price do buyers pay? What price do suppliers receive? Find consumer surplus, producer surplus, deadweight loss, and tax revenue.

  Severity of economic fluctuations

Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations

  Current account deficit must be reduced

Suppose that the US current account deficit must be reduced. Explain in terms of CA ≈ (S – I) + (T – G) what must be done to reduce the current account deficit. Why will this be difficult? (Hint: It may be helpful to think about the household that ha..

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