Question
In: Finance
If a company has a debt to equity ratio of 1.3, then the equity multiplier is...
If a company has a debt to equity ratio of 1.3, then the equity multiplier is approximately:
1. 2.3
2. 1.3
3. 2.6
Solutions
Expert Solution
The company has a debt to equity ratio of 1.3. This means,
Debt/Equity = 1.3
Debt = 1.3Equity
Total Assets = Debt + Equity
= 1.3 Equity +
Equity
= 2.3 Equity
Equity multiplier measures the firm’s asset that are financed by
Equity. The formula to calculate Equity multiplier is :
Equity Multiplier = Total Assets/ Total Stock holder’s Equity
Using the value of Total Assets derived above,
Equity Multiplier = 2.3Equity/Equity
= 2.3
jeff jeffy answered 1 year agoRelated Solutions
Firm A has a beta of 1.3 and a debt-to-equity ratio of 0.4 and an interest...
Firm A has a beta of 1.3 and a debt-to-equity ratio of 0.4 and
an interest rate of 9% on its debt. It has chosen Firm P as a proxy
for a new line of business it is considering. Firm P has a beta of
1.6 and a debt to equity ratio of 0.8 and the expected return on
the S&P 500 is 12% and the risk-free rate is 5.5%. The marginal
tax rate is 40%.
A. Find the correct...
Firm X has a beta of 1.3 and a debt-to-equity ratio of 0.7 . It has...
Firm X has a beta of 1.3 and a debt-to-equity ratio of 0.7
.
It has deb with a coupon of 8%, face value of $1,000 and
yield-to-maturity of 12%. It has chosen firm P as a proxy company
for a new project it is considering in a totally different line of
business from its present one. Firm P has a beta of 1.6 and
debt-to-equity ratio of 0.4 and a bond with yield-to-maturity of
10%, a coupon of 12%...
Firm X has a beta of 1.3 and a debt-to-equity ratio of 0.7 . It has...
Firm X has a beta of 1.3 and a debt-to-equity ratio of 0.7
.
It has deb with a coupon of 8%, face value of $1,000 and
yield-to-maturity of 12%. It has chosen firm P as a proxy company
for a new project it is considering in a totally different line of
business from its present one. Firm P has a beta of 1.6 and
debt-to-equity ratio of 0.4 and a bond with yield-to-maturity of
10%, a coupon of 12%...
A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of.4
A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of.4. The appropriate discount rate to use in analyzing this project is: Multiple ChoiceThe cost of equity capital.Zero.The Treasury bill rate.An adjusted WACC based on a beta of 1.0.The firm's latest WACC.
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...
Skillet Industries has a debt–equity ratio of 1.3. Its WACC is 8.6 percent, and its cost...
Skillet Industries has a debt–equity ratio of 1.3. Its WACC is
8.6 percent, and its cost of debt is 7.4 percent. The corporate tax
rate is 35 percent.
a.
What is the company’s cost of equity capital? (Round
your answer to 2 decimal places. (e.g., 32.16))
Cost of equity capital
%
b.
What is the company’s unlevered cost of equity capital?
(Round your answer to 2 decimal places. (e.g.,
32.16))
Unlevered cost of equity capital
%
...
Blitz Industries has a debt-equity ratio of 1.3. Its WACC is 8.5 percent, and its cost...
Blitz Industries has a debt-equity ratio of 1.3. Its WACC is 8.5
percent, and its cost of debt is 6.2 percent. The corporate tax
rate is 22 percent. a. What is the company’s cost of equity
capital? (Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.
What is the company’s unlevered cost of equity capital? (Do not
round intermediate calculations and enter your answer as a percent
rounded to...
Company has debt-to-total assets ratio is 0.4. What is its debt to equity ratio
Company has debt-to-total assets ratio is 0.4. What is its debt
to equity ratio
A company has a debt-to-equity ratio of 0.62, an asset turnover ratio of 1.39, and a...
A company has a debt-to-equity ratio of 0.62, an asset turnover
ratio of 1.39, and a profit margin of 7.8%. The total equity is $
672,100. What is the amount of net profit?
The beta of the equity of CDE Company is 1.67 and CDE has a debt-to-equity ratio...
The beta of the equity of CDE Company is 1.67 and CDE has a
debt-to-equity ratio of 0.67 calculated at market values. The debt
is risk-free and perpetual. CDE generates annual EBIT of $100 and
has 100 shares of common stock outstanding. The expected return on
the market portfolio is 15% and the risk-free interest rate is 5%.
The corporate tax rate is 30%. Assume that personal taxes and
bankruptcy costs are not relevant.
1. Compute the current market value...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Can you explain to me the differnces in how we paid for the health care (access...
- Discuss proactive and defensive marketing in context to the company position in the hypothetical market structure...
- Write a java code that could be used to show the simulation of a tornado. use...
- A Canadian company issues an 8-year term bond with face value of $1,000 and 6% coupon...
- 1. Consider the following nuclides: &
- In general, teams can be described three ways. Name and define each.
- JAVASCRIPT: Please create an array of student names and another array of student grades. - Create...
ADVERTISEMENT