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 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...
WRX Corp. has an equity beta of 1.20, a market value
debt-to-equity ratio of 0.50, debt that is rated AAA, and a tax
rate of 21%. Compute WRX Corp’s weighed average cost of capital
(WACC) assuming that the current risk-free rate is 5%, the expected
return on the market portfolio is 12%, and the current market price
of 7.5% AAA bonds, with par values of $1000 maturing in 12 years is
$1200. Assume that the bond makes annual coupon payments....
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.