What is the WACC of Thunder Inc

Assignment Help Accounting Basics
Reference no: EM132923806

Question - Thunder Inc. is a private chemical industrial firm. It is expected to generate annual net operating income of $1,500,000 in perpetuity. You are trying to determine its market value. You decide to use Harbor Industries, a public firm, as a comparable firm to guide your valuation. Harbor industries has a debt-to-equity ratio of 0.25. It has an equity beta of 1.2, and debt beta of 0.4. You decide to use the unlevered beta of the comparison firm as the estimation of the unlevered beta for Thunder Inc. Suppose, Thunder Inc. has a debt-to-equity ratio of 33%, and can borrow at 5% rate. It also has a debt beta of 0.3. The risk-free rate is 4%, the market premium is 5%, and the corporate tax rate is 20%. What is the WACC of Thunder Inc.?

Reference no: EM132923806

Questions Cloud

What would be the company overall break-even point : If the sales volumes in the East and West regions had been reversed, what would be the company's overall break-even point in unit sales
Explain why auditors seek letters of representation : Human capital is a large investment for any organization. Management of this capital is a necessary task to ensure strong return on the investment. Human resour
Differences between management and leadership : What are the fundamental differences between management and leadership - would you consider yourself a better leader or a better manager and why?
What are the conflicts in addressing issues : What are the conflicts in addressing issues/ ethical practices covered and not covered by law?
What is the WACC of Thunder Inc : The risk-free rate is 4%, the market premium is 5%, and the corporate tax rate is 20%. What is the WACC of Thunder Inc.
Support the evolution of collaborative agreements : Support the evolution of collaborative agreements - Identify opportunities for collaboration with external companies or between organisational departments
Four distinct leadership styles : Thompson et al (2008) identified four distinct leadership styles that leaders can display in leading an organisation to its required destiny namely telling, sel
Workforce capability requirements : Give three examples of questions that may be asked in relation to workforce capability requirements.
What are disparities of health : What are disparities of health and why are they important to address? List three resources needed to benchmark disparities of health

Reviews

Write a Review

Accounting Basics Questions & Answers

  What are the equivalent units of production for materials

Using the weighted-average method, what are the equivalent units of production for materials and for conversion costs

  A companys payroll runs 2800 every two weeks 200 per day

a companys payroll runs 2800 every two weeks 200 per day the last pay day was friday december 19th and the next pay day

  Find the Evelyn net income for the year ended December

Evelyn Company purchased equipment that cost $150,000 on January 1, 2011. Find the Evelyn's net income for the year ended December 31, 2009

  On january 1 20x8 transport corporation acquired 75 percent

on january 1 20x8 transport corporation acquired 75 percent interest in steamship company for 300000. steamship is a

  Prepare entries for these transactions

Quisp Co. had the following transactions in the last two months of its year ended December 31.

  What amount of share premium will arise from the exercise

Screw Corporation granted its employees options to purchase 5,000 shares of Screw's, What amount of share premium will arise from the exercise

  Find the equivalent production for the month

It had 500 units of which 40 percent were completed but the process at the end of the month. Equivalent production for the month was

  What is the amount of prepaid insurance in the statement

Given the information provided above (Q11) what is the amount of prepaid insurance in the statement of financial position as at 31 December 2018

  Discuss what can you do to exploit your strength

What can you do to exploit your strength and what can you do to develop your weaknesses

  Explain how managers are expected to react

Use two different perspectives typically applied in positive accounting theory to explain how managers are expected to react

  Calculate and determine the cost of goods available for sale

Calculate and determine the cost of goods available for sale?the cost of goods sold?the cost of goods available?Bramble Company reports the month of June.

  Where hundreds or thousands of parts

where hundreds or thousands of parts must be purchased to manufacture cars. Briefly describe how EDI would be beneficial in this industry.

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