What is the cost of equity capital

Assignment Help Financial Management
Reference no: EM131054698

Winston’s has a beta of 1.08 and a cost of debt of 8 percent. The current risk free rate is 3.2 percent and the market rate of return is 11.47 percent. What is the company's cost of equity capital?

Reference no: EM131054698

Questions Cloud

What are the alternative forms of business organization : Marty Kimble, who “retired” many years ago after winning a huge lottery jackpot, wants to start a new company that will sell authentic sports memorabilia. He plans to name the company Pro Athlete Remembrances, or PAR for short. Assume that PAR is org..
Project has an initial fixed asset investment : A five-year project has an initial fixed asset investment of $260,000, an initial NWC investment of $20,000, and an annual OCF of −$19,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Level capacity with inventory and matching demand : For the scenario provided, calculate the two costs of two different strategies: a. level annual production with inventory and stockout b. matching or chasing demand. The Sherman-Brown Chemical Company is in the process of developing an aggregate capa..
The current value of the debt if the interest rate on bonds : TL Company has expected earnings of $75 in one year if it does well and $25 if it does poorly. The firm has outstanding debt of $50 that is due in one year. However, given the financial distress costs, the debtholders will only receive $40 in one yea..
What is the cost of equity capital : Winston’s has a beta of 1.08 and a cost of debt of 8 percent. The current risk free rate is 3.2 percent and the market rate of return is 11.47 percent. What is the company's cost of equity capital?
The adjusted present value method-flow to equity method : The adjusted present value method (APV), the flow to equity (FTE) method, and the weighted average cost of capital (WACC) method produce equivalent results, but each can have difficulties making computation impossible at times. Given this, which one ..
How much will a shareholder receive in aftertax income : Assume the corporate tax rate is 34 percent, the personal tax rate on interest income is 15 percent, and the personal tax rate on dividends is 10 percent. If the firm earns $5 per share in taxable income and pays out 40 percent of its earnings, how m..
What is the promised return to those bondholders : Assume a firm’s debt holders are promised payments in one year of $35 if the firm does well and $20 if the firm does poorly. There is a 50/50 chance of the firm doing well or poorly. If bondholders are willing to pay $25.50, what is the promised retu..
The cost of equity for an all-equity firm is less : The cost of equity for an all-equity firm is less than the cost of equity for a levered firm. The discount rate for levered equity is unaffected by the debt-equity ratio. The cost of levered equity is indirectly related to beta. The weighted average ..

Reviews

Write a Review

Financial Management Questions & Answers

  Find the present values of these ordinary annuities

Find the present values of these ordinary annuities. Discounting occurs once a year. a. $400 per year for 10 years at 10%.

  What should the price of the stock be today

You have been asked to value a stock. Stock AAA is expected to pay a dividend of $2 next year (t=1) and $2.20 the year after (t=2). After the end of the second year, stock or equity analyst expect dividends to grow at a constant rate of 4.0% per year..

  What is the annual cost of the inventory system

Rusk Corporation sells 185,000 gallons of paint annually at several retail outlets. The ordering cost per order is $75, and its cost of capital is 10%. The storage and handling cost for paint is $2 per year, based on average inventory. Find the optim..

  What is the tax implication on the sale

A machine will reach the end of its useful life in year 5. The realizable salvage value is expected to be $50,000 with a book value of zero. The company's marginal tax rate is 34%. What is the tax implication on the sale of the new machine at year 5?

  Nbspyou will also learn about the different approaches an

you will explore how businesses react to changing economic times and the influence this has on productservice

  Bond pricing-assume annual interest payments

Bond Pricing. A General Power bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%. (Assume annual interest payments.) (LO6-1 and LO6-2) a. What interest payments do bondholders receive each year? b. At..

  Investigating the viability of the project

If considering an expansion project. To date, the company has spent $75,000 investigating the viability of the project and have decided to proceed. The proposed project will cost $450,000 in addition to the $75,000 that was spent on the feasibility s..

  Finding the optimal capital balance seems quite nebulous

It seems clear that more debt leads to more risk, which is bad, but more debt also leads to higher expected returns, which is good. However, finding the optimal capital balance seems quite nebulous. Moreover, the textbook indicates that capital struc..

  Find the future value of an investment

Find the future value of an investment of $3,400 made today for the following rates and periods: Future value $ d. 10 percent compounded daily for three years. Future value $ e. 8 percent compounded continuously for two years. Future value $

  What is the present value of the perpetuity

What is present value of perpetuity of $100 per year with first payment started 5 years from today if appropriate discount rate is 5%? If discount rate is increased to 15% what is the present value of the perpetuity?

  Ockbox system offered by bank located in pittsburgh

Time Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh.

  How much will you have if you make deposits

If you deposit $4,000 at the end of each of the next 20 years into an account paying 9.7 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years?

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