Question

In: Finance

23.Jack Ltd has an equity beta of 1.4, the risk-free rate is 3.4 percent and market...

23.Jack Ltd has an equity beta of 1.4, the risk-free rate is 3.4 percent and market risk premium is 8 percent. The yield to maturity of the firm’s bonds is 7 percent and the debt-equity ratio is 0.5. What is the weighted average cost of capital if the tax rate is 30 percent?

Select one:

a. 11.37 percent

b. 11.65 percent

c. 10.94 percent

d. 12.60 percent

24.

Jack Ltd has a levered cost of equity of 13.84 percent and an unlevered cost of capital of 12.5 percent. The company has $5,000 in debt that is selling at par. The levered value of the firm is $14,600 and the tax rate is 30 percent. What is the pretax cost of debt?

Select one:

a. 9.93 percent

b. 8.82 percent

c. 3.68 percent

d. 8.60 percent

Expert Solution

jeff jeffy answered 1 year ago

Suppose the Simmons Co's common stock has a beta of 1.37, the risk-free rate is 3.4...

Suppose the Simmons Co's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent. The yield to maturity in the firm’s bonds is 7.6 percent and the debt-equity ratio is .45. What is the cost of equity of this firm? What is the WACC if the tax rate is 34 percent?

Information about Vortex: Equity information: Equity beta = 1.4, T-bond rate 2.5%, market risk premium =...

Information about Vortex: Equity information: Equity beta = 1.4, T-bond rate 2.5%, market risk premium = 7%, # of shares outstanding = 15.5 millions Debt information: Bond YTM 6.5%; Total market value of debt: $1.9 million Tax rate = 21% Capital structure: 40% debt, 60% equity Current FCFF = $125 million. FCFF is expected to grow at 20%, 15%, and 10% for the next 3 years, then slow down to 5% indefinitely thereafter. What is WACC, Firm Value, Equity Value,...

A company has a beta of 0.75. The risk-free rate is 4.65% and the market risk...

A company has a beta of 0.75. The risk-free rate is 4.65% and the market risk premium is 7.80%. The company is expected to pay annual dividends. The first dividend is expected to be paid in 4 years and is expected to be $1.30. The dividend in year 5 is expected to be $2.30, and then the dividend is expected to grow 1.5% annually thereafter. What should the price of the stock be?

assume that Storches equity has a Beta of 1.1 the risk free rate is 2.7% and...

assume that Storches equity has a Beta of 1.1 the risk free rate is 2.7% and the market risk premium is 5%. According to the Capital Asset Pricing Model what should be the required rate of return?

a) Baxter International has an equity beta of 0.8, a risk-free rate of 3% and a...

a) Baxter International has an equity beta of 0.8, a risk-free rate of 3% and a market portfoli return of 11%. The firm has a debt-to-equity ratio of 0.5 with the cost of debt at 6%. The marginal tax rate is 40%. What is the cost of capital of the firm, if CAPM holds? b) Suppose the firm is also considering a warehouse renovation costing $60 million that is expected to generate cost savings of $12 million per year for...

A company has a beta of 1.5. The risk-free rate of return is 5 percent and...

A company has a beta of 1.5. The risk-free rate of return is 5 percent and the market risk premium is 6 percent. Find the required rate of return on the stock (i.e., the cost of equity capital). b) The firm will pay a dividend of $4.00 per share next year. The firm will increase the dividend payment by $0.50 a share every year for the next 5 years (i.e., years 2 to 6). Thereafter, the dividends are expected to...

A stock has a beta of 2.2, the risk-free rate is 6 percent, and the expected...

A stock has a beta of 2.2, the risk-free rate is 6 percent, and the expected return on the market is 12 percent. Using the CAPM, what would you expect the required rate of return on this stock to be? What is the market risk premium?

Assume that the risk-free rate is 4.1 percent. If a stock has a beta of 0.5...

Assume that the risk-free rate is 4.1 percent. If a stock has a beta of 0.5 and a required rate of return of 10.1 percent, and the market is in equilibrium, what is the return on the market portfolio? Show your answer to the nearest .1% using whole numbers (e.g., enter 14.1% as 14.1 rather than .141). Your Answer? An analyst has estimated how a stock's return will vary depending on what will happen to the economy. If a Recession...

If the market risk premium is 2%, the risk-free rate is 4.4% and the beta of...

If the market risk premium is 2%, the risk-free rate is 4.4% and the beta of a stock is 1.2, what is the expected return of the stock?

A firm has a beta of 1.2. The market return equals 14 percent and the risk-free...

A firm has a beta of 1.2. The market return equals 14 percent and the risk-free rate of return equals 6 percent. What is the estimated cost of common stock equity?