What should be the cost of equity of your firm

Assignment Help Financial Management

Reference no: EM132002685

1) Suppose you borrow $65000 when financing a coffee shop which is valued at $120000. Assume that the unlevered cost of capital for the coffee shop is 7.5% and that the cost of debt is valued at 5%. What should be the cost of equity of your firm?

2) ECB borrows $1750000 USDs by issuing 4-year bonds. ECB's cost of debt is 5.5%, so it will need to pay $96250 USDs in interest each year for the next 4 years, and then repay the principal $1750000 USD in year 4. ECB's marginal tax rate will remain 35 throughout this period. By how much (in USDs) does the interest tax shield increase the value of ECB?

Reference no: EM132002685

Questions Cloud

What is the current price of stock : What is the current price of a stock that is under going a rapid dividends growth of 30% for the next two years, and dividends will grow at 6% thereafter.

What is the break-even probability of default : Assuming the customer becomes a repeat customer, what is the break-even probability of default?

Current shareholders of financing the project out of equity : What is the cost (in USDs) to current shareholders of financing the project out of equity?

Current shareholders of financing the project out of debt : What is the cost (in USDs) to current shareholders of financing the project out of debt?

What should be the cost of equity of your firm : Suppose you borrow $65000 when financing a coffee shop which is valued at $120000. What should be the cost of equity of your firm?

What should the value of the equity be : Suppose you borrow $800000 when financing a coffee shop which is valued at $1958500. What should the value of the equity be?

Determine the after-tax cost of financing its purchase : The Wilmoths plan to purchase a house but want to determine the after-tax cost of financing its purchase.

Originating lenders contribute to the financial crisis : How did originating lenders contribute to the financial crisis?

Written many articles on managing financial risk : Find one article by Dr. James Kallman. Dr. Kallman, an expert in the field of risk management, has written many articles on managing financial risk.

User Account

All Pages