Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Capital structure theory:
Use the following information to answer the questions:
Case I: Capital structure theory (no tax)
Case II: Capital structure theory (corporate tax)
WACC : 10%
Debt-to-firm value(D/V) : 50%
Cost of debt : 6%
EBIT : $40 million
Tax rate : 50%
Unlevered cost of capital : 10%
a. In Case I, when the debt-to-firm value decreases to 40%, figure out the new WACC. And does the cost of equity increase or decrease?
b. In Case II, when the debt is zero, figure out the firm's value based on the assumption that EBIT is constant forever. Again, when the debt increases to $30mil., figure out the firm's value?
c. In Case II, when the debt increases to $30mil., does the WACC increase or decrease or stay the same? And does the cost of equity increase or decrease?
Revenue Recognition or Realisation The resources of business are utilized to earn revenue through sale of goods or rendering of services.The American Accounting Association d
If an optimal capital structure exists, what are the reasons why too little debt is as undesirable as is too much debt? Too little debt may be as unwanted as too much debt for
Explain the determinants of operating exposure. Answer: The main determinants of a company’s operating exposure are (a) The structure of the markets where the company sourc
the managing directors of three profitable listed companies discussed their company''''s dividend policies. company A has deliberately paid no dividends for the past five years. co
The managing directors of three profitable listed companies discussed their companies' dividend policies at a business lunch. Company A ; has deliberately paid no dividends for
Q. Describe Historical cost and future costs? Historical cost and future costs: another problem in the determine of cost of the capital arise on the accounts of the difference
The first step in valuation process is to estimate the cash flows that are expected to be received in the future. In debt securities, there are two types of possi
Types of Government Stocks Issue of Stock through AuctionThe RBI, on behalf of the government, issues notification to auction government securities, stating the amount and time
The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income
How do opportunity costs affect the capital budgeting decision-making process? Opportunity costs reflect the foregone advantages of the alternative not chosen when a capital bu
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd