Below is the information on R firm and its tax rate is at 25% . Hasil...

Below is the information on R firm and its tax rate is at 25% .

Hasil hingga Matang (Yield to Maturity)	9%
(Number Common Stocks)	20,000
(Price Per share)	$40
(Long-term debt)	$400,000
(Book value per share)	$30
(Expected Rate of Return on Stock)	16%

i.) Find the company cost of capital

ii.) Subsidiary company to R firm, i.e. FL firm book value is at RM25 per share and its trading price currently is $50. The company’s balance sheet is showing $30 billion in long-term debt and it’s the same as its current value. It has 600 million shares currently outstanding. What is its market debt to total value ratio?(Assuming there is not tax rate)

Expert Solution

ekkarill92 answered 2 years ago

Problem #1: A firm with a normalized pretax income of $40 million, 25% tax rate, and...

Problem #1: A firm with a normalized pretax income of $40 million, 25% tax rate, and a Total Debt/Total Capital ratio of 30%, decides to undertake a capital expansion financed by new debt. The new level of debt will raise the Total Debt/Total Capital ratio to 40% (5-percentage points above its industry average). As a result, the firm’s credit rating is downgraded by a full level (say for example, from A to B) despite being secured by specific assets. This...

A firm has the following capital structure. Assume the company's tax rate is 25% Debt: the...

A firm has the following capital structure. Assume the company's tax rate is 25% Debt: the firm has 5,000 6% coupon bonds outstanding $1000 par value, 11 years to maturity selling for 103 percent of par: the bonds make semiannual payments. Common Stock: The firm has 375000 shares outstanding, selling for $65 per share; the beta is 1.08 Preferred Stock: The firm has 15,000 shares of 5% preferred stock outstanding, currently selling for $75 per share. There is currently a...

1.) You are evaluating a privately-held target firm with a 25% marginal tax rate and a...

1.) You are evaluating a privately-held target firm with a 25% marginal tax rate and a targeted capital structure of 20% debt and 80% equity. You have identified a comparable firm with an equity beta of 1.34. The comparison firm has a marginal tax rate of 30% and a D/E ratio of 0.5. What is your estimate of the equity beta of the target firm? 2.) Suppose you are using industry average betas to estimate the cost of equity for...

Bank Debt information: r d: Interest rate on bank loans 10 % T: Annual Tax rate...

Bank Debt information: r d: Interest rate on bank loans 10 % T: Annual Tax rate 40 % Preferred stock information: D ps: Annual Dividends on preferred stock $ 6 P: Issuing price of ZARA’s Corporation preferred Stock $ 100 FC: Flotation cost on issue of preferred stock / per share $ 4 Common Stock information r RF: Market risk Free Rate 5% RP: Expected Market Risk Premium 5% bi: ZARA stocks beta coefficient (index of the stocks risk) 2...

Thomson Trucking has $12 billion in assets, and its tax rate is 25%. Its basic earning...

Thomson Trucking has $12 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 17%, and its return on assets (ROA) is 7.25%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Thomson Trucking has $18 billion in assets, and its tax rate is 25%. Its basic earning...

Thomson Trucking has $18 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 20%, and its return on assets (ROA) is 6.25%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places

Thomson Trucking has $15 billion in assets, and its tax rate is 25%. Its basic earning...

Thomson Trucking has $15 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 15%, and its return on assets (ROA) is 6.25%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Thomson Trucking has $25 billion in assets, and its tax rate is 40%. Its basic earning...

Thomson Trucking has $25 billion in assets, and its tax rate is 40%. Its basic earning power (BEP) ratio is 19%, and its return on assets (ROA) is 5%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Assume a corporate tax rate is 40% and an individual tax rate of 25%. Perryton Corp....

Assume a corporate tax rate is 40% and an individual tax rate of 25%. Perryton Corp. earned $12,000,000 before income taxes during the year. Perryton kept $5,000,000 of after-tax profits inside the company to support future growth. How much total tax would have been paid to Internal Revue Service (IRS) by all related parties?

Suppose the corporate tax rate is 35%, and investors pay a personal tax rate of 25%...

Suppose the corporate tax rate is 35%, and investors pay a personal tax rate of 25% on income from dividends or capital gains and a personal tax rate of 32.4% on interest income. Your firm decides to add debt so it will pay an additional $30 million in interest each year. It will pay this interest expense by cutting its dividend. a. How much will debt holders receive after paying taxes on the interest they earn? b. By how much...

Question