Question

In: Accounting

debt to equity ratio: How does a business value on the number scale overall affect a...

debt to equity ratio:

How does a business value on the number scale overall affect a business financial well-beng?

Solutions

Expert Solution


Related Solutions

According to the Modigliani Miller approach, how does using debt affect the business value?
According to the Modigliani Miller approach, how does using debt affect the business value?
Question: What does the debt to equity ratio show, and how is it calculated?
  Question: What does the debt to equity ratio show, and how is it calculated?
A firm has debt-equity ratio of 1 (i.e. the value of the debt divided by the...
A firm has debt-equity ratio of 1 (i.e. the value of the debt divided by the value of the equity euqals one). The beta of the equity is 1.2 and the beta of the debt is 0.1. The risk free rate is 5% and the return on the market index is 10%. What is the WACC (weighted average cost of capital) for the firm? Suppose the firm above increases its borrowing so that the debt-equity ratio is 2. The recapitalization...
A firm has a debt-equity ratio of 4. The market value of the firm’s debt and...
A firm has a debt-equity ratio of 4. The market value of the firm’s debt and equity is £5m. What is the value of the firm’s debt? A: £4.0m B: £3.8m C: £4.5m D: £2.6m A firm has a debt-equity ratio of 4. The cost of debt capital is 8% and the cost of equity capital is 12%. What is the weighted average cost of capital for the firm (WACC)? A: 10.1% B: 8.8% C: 9.5% D: 9.2% Suppose Modigliani-Miller...
The debt-equity ratio determines the amount of _____ risk that is associated with a firm. business...
The debt-equity ratio determines the amount of _____ risk that is associated with a firm. business systematic unsystematic financial
The debt-equity ratio determines the amount of _____ risk that is associated with a firm. business...
The debt-equity ratio determines the amount of _____ risk that is associated with a firm. business systematic unsystematic financial
Computing the debt to equity ratio
  Question: Computing the debt to equity ratio Jackson Corporation has the following amounts as of December 31, 2018. Total assets $ 55,250 Total liabilities 22,750 Total equity 32,500 Compute the debt to equity ratio on December 31, 2018.
A firm has a debt-to-value ratio of 1/3. It has only debt and equity in its...
A firm has a debt-to-value ratio of 1/3. It has only debt and equity in its capital structure. Its before tax cost of debt is 9% and the after tax weighted average cost of capital (WACCAT) is 12%. What is the firm’s cost of equity if the tax rate for the firm is 35%? 16.050% 15.075% none of these 18.000% 9.000%
Calculate the value of short-term debt given the following information: total debt = $320,000; debt/equity ratio...
Calculate the value of short-term debt given the following information: total debt = $320,000; debt/equity ratio = 0.80; long-term debt ratio = 0.3750. Select one: a. 85000 b. 65000 c. 70000 d. 80000 e. 75000
The company currently has a target debt–equity ratio of .45, but the industry target debt–equity ratio...
The company currently has a target debt–equity ratio of .45, but the industry target debt–equity ratio is .40. The industry average beta is 1.20. The market risk premium is 8 percent, and the risk-free rate is 6 percent. Assume all companies in this industry can issue debt at the risk-free rate. The corporate tax rate is 40 percent. The project requires an initial outlay of $680,000 and is expected to result in a $100,000 cash inflow at the end of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT