Question

In: Finance

Imagine a very simple business wherein funds are raised and invested at time 0 and rewards...

Imagine a very simple business wherein funds are raised and invested at time 0 and rewards (if any) are reaped at time 1 (the firm ceases to exist after this). There are two possible outcomes, success and failure. If the firm is successful, it will generate a $45,000 in cash. If it is a failure, it will only generate $7,000. At time 0, the firm raises $30,000--$20,000 in equity and $10,000 from pure discount debt (which has a face value of $11,500). There is a 10% chance of failure. Find the current value of the debt and the equity, and their required returns. Using those, find the firm's WACC, ignoring taxes.

Solutions

Expert Solution

SEE EXCEL IMAGE

Go through it, Any doubts, please feel free to ask, Give positive feedback, Thank you


Related Solutions

The model to the right is a very simple Income/Loss Statement for a manufacturing business. There...
The model to the right is a very simple Income/Loss Statement for a manufacturing business. There are many simplifications in this model, but an Income/Loss Statement is a very useful tool for analyzing profitability when numerous variables need to be considered. The model assumes that the variable values are known (deterministic), but this does not restrict the user from asking numerous important "What-If" questions. You can determine the model's assumptions by examining the cells where calculations take place...e.g. notice the...
Determine the amount of money that must be invested now​ (time 0) at 6​% nominal​ interest,...
Determine the amount of money that must be invested now​ (time 0) at 6​% nominal​ interest, compounded​ monthly, to provide an annuity of ​$7000 per year for 14 ​years, starting seven years from now. The interest rate remains constant over this entire period of time.
I need a list of business rules and corresponding ERD for a simple, very basic Pet...
I need a list of business rules and corresponding ERD for a simple, very basic Pet Store. Don’t think Petco or PetSmart, think little shop with only one location. They sell puppies, kittens, fish, and some reptiles. They also sell fancy food, toys, and beds for all these pets. Basically, the store sells things (2 entities), by whom (entity), to who (entity), and how (entity). I need two things: First, information containing the operation and business rules for a simple...
Just make it very simple For any of the business-related projects you are familiar with, provide...
Just make it very simple For any of the business-related projects you are familiar with, provide a brief overview to remind everyone of the project. After the overview, describe the project performance measurement and evaluation system. Did it measure the important aspects of the project? Why or why not? What changes would you recommend?
Overview: In the third milestone, you will jump forward in time: Imagine that your business has...
Overview: In the third milestone, you will jump forward in time: Imagine that your business has already opened. Use the updated scenario information to analyze your company’s performance. Post-opening Scenario: Your angel investors are silent in relation to the business; however, they require board meetings for status updates on the company’s financial health. Therefore, you need to analyze your company’s performance over the last month using the data provided below. Note: Your instructor will create an announcement sharing the income...
Problem 2 (10 marks) You have been very successful in business and it is time to...
Problem 2 You have been very successful in business and it is time to buy the big boat so you can sail the blue seas of the Bedford basin and entertain your friends. You do your research and find the boat you want in Portugal. The price of the boat is $300,000 and it will cost $20,000 to have the boat delivered to Halifax. You go to the bank to borrow the entire amount of the purchase and the bank...
The sample of 150 business majors, 75 rated an online training in pandemic time is very...
The sample of 150 business majors, 75 rated an online training in pandemic time is very effective. The same view was held by 81 of an independent random sample of 180 economic majors. Test at the 5% level against a two-sided alternative the null hypothesis that the population business major and economic majors students who rate an online training is very important.
The sample of 150 business majors, 75 rates online training in pandemic time is very effective....
The sample of 150 business majors, 75 rates online training in pandemic time is very effective. The same view was held by 81 of an independent random sample of 180 economic majors. Test at the 5% level against a two-sided alternative the null hypothesis that the population business major and economic majors students who rate online training are very important Note: you have to draw the table to see which area you have to calculate.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT