What is the cost of equity if the aftertax cost of debt

Assignment Help Financial Management
Reference no: EM13940141

Dee’s Toys has a target debt-equity ratio of .55. Its WACC is 12.4 percent and the tax rate is 34 percent. What is the cost of equity if the aftertax cost of debt is 5.5 percent?

A. 15.75%

B. 15.84%

C. 14.41%

D. 14.79%

E. 16.20%

Reference no: EM13940141

Questions Cloud

Synergies will enable the dividend to grow at constant rate : Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 4% and the market risk premium is 6%. Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.30 a ..
Write an article about earthquakes in Nepal : Write an article about earthquakes in Nepal
Risk-free rate of interest-what is the per-share value : Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5% and the market risk premium is 7%. What is the per-share value of Van Buren to Harrison Corporation?
Assume that the risk-free rate of interest : Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5% and the market risk premium is 6%. Van Buren currently expects to pay a year-end dividend of $1.70 a share (D1 = $1.70). Van Buren..
What is the cost of equity if the aftertax cost of debt : Dee’s Toys has a target debt-equity ratio of .55. Its WACC is 12.4 percent and the tax rate is 34 percent. What is the cost of equity if the aftertax cost of debt is 5.5 percent?
Identify the key steps in the closing process that provide : Financial Statement Accuracy Identify the key steps in the closing process that provide the most opportunity to make mistakes in processing account transactions. make atleast (2) recommendations for improving the accuracy and reliability of the infor..
Target debt—equity ratio : Sixx AM Manufacturing has a target debt—equity ratio of 0.54. Its cost of equity is 18 percent, and its cost of debt is 11 percent. If the tax rate is 32 percent, what is the company's WACC?
Requires an initial fixed asset investment : Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,190,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worth..
Componentes fundamentales de mercadeo discutidos : 1. Selecciona un producto y realiza un análisis del mismo a partir de los conceptos y componentes fundamentales de mercadeo discutidos en las unidades 1, 2 y 3 del libro Fundamentos de Marketing

Reviews

Write a Review

Financial Management Questions & Answers

  What is the companys expected rate of return

The Fun Company's stock has a 50% chance of producing a 23% return, a 30% chance of producing a 20% return and 20% chance of producing a -29% return. What is the company's expected rate of return?

  Create the companys income statement and balance sheet

In its closing financial statements for its first year in business, ABC Enterprises, had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of $3,408, accounts payable of $700, short-term notes payable of $740, long-term l..

  Explain why investors behaved in the given manner

Explain why investors behaved in this manner. Why does the IFE suggest that South East Asian countries would not have attracted foreign investment before Asian crisis despite high interest rates prevailing in those countries?

  What is the expected return on the portfolio

You own a portfolio that is 29 percent invested in Stock X, 44 percent in Stock Y, and 27 percent in Stock Z. The expected returns on these three stocks are 8 percent, 11 percent, and 13 percent, respectively. What is the expected return on the portf..

  What is the maximum percentage decline in the stock

You decide to buy 1,500 shares of stock at a price of $62 and an initial margin of 80 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 40 percent?

  What will firm new net profit margin-desired growth rate

Rowan Company has a net profit margin of 8.3 percent, debt ratio of 41 percent, total assets of $4,332,200, sales of $7,182,600, and a dividend payout ratio of 57 percent. The firm’s management desires a sustainable growth rate (SGR) of 11 percent bu..

  What is the bonds yield to maturity

Suppose a 10-year, $1,000 bond with a 7% coupon rate and semi annual coupons is trading for a price of $1,195.23. What is the bond's yield to maturity (expressed as an APR with semi annual compounding.)? If the bonds yield to maturity changes to 9% A..

  Calculate the yield-to-maturity

Cellular International zero coupon bonds (par value $1,000) mature on April 21, 2020. Calculate the yield-to-maturity if an investor purchased one of these bonds on April 21, 2014, at a price of $650.

  Treasury bill-maturity quoted at discount yield

How much would you pay for a U.S. Treasury bill with 89 days to maturity quoted at a discount yield of 2.17 percent? Assume a $1 million face value.

  How banter can attempt to reduce its economic exposure

Of its revenues, 60% are due to exports to the US, where its product is invoiced in dollars. Explain how Banter can attempt to reduce its economic exposure to exchange rate fluctuations in the dollar.

  Percent of the time for long-term corporate bonds

Consider the following table for the total annual returns for a given period of time. Series Average return Standard Deviation Large-company stocks 11.7 % 20.6 % Small-company stocks 16.4 33.0 Long-term corporate bonds 6.3 9.6 Long-term government bo..

  How much should we budget for electricity

Last year we budgeted $8,000 for electricity. We expect to the price per kilowatt hour (kWh) to go up from 6.5 cents per kWh to 7 cents per kWh. We have also recently implemented a program to reduce energy usage and expect our usage to decrease by 20..

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