Question
In: Finance
Assumption: The company has weight of debt WD = 60%, cost of debt RD = 14%,...
Assumption: The company has weight of debt WD = 60%, cost of debt RD = 14%, for unleveraged firm: Bu =1; the company has Tax Rate=35%, risk-free rate Rf = 5%, Market Return = 11%, free cash flow FCF0 = 250 million, growth rate g =3%. Use the following formula for beta of leveraged company: B = Bu [1+ (1-T) × (Wd /Ws)], What is the WACC and what is the value of the firm?
Please show work
Solutions
jeff jeffy answered 1 year agoRelated Solutions
4. Tri Co. has the following cost of debt structure (14’) wd 0% 20% 30% 40%...
4. Tri Co. has the following cost of debt structure (14’) wd 0%
20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% The market risk
premium is 4.5%, the risk free rate is 5%, beta of unleveraged firm
is 1.20, Hamada’s equation b= bU [1 + (1 - T)(wd/we)]. T=40%.
Please use the above information to answer following questions: a)
If the firm uses 50% debt, what is the cost of equity of the firm,
based on CAPM model?...
4. Tri Co. has the following cost of debt structure (14’) wd 0% 20% 30% 40%...
4. Tri Co. has the following cost of debt structure (14’) wd 0%
20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% The market risk
premium is 4.5%, the risk free rate is 5%, beta of unleveraged firm
is 1.20, Hamada’s equation b= bU [1 + (1 - T)(wd/we)]. T=40%.
Please use the above information to answer following questions:
a) If the firm uses 50% debt, what is the cost of equity of the
firm, based on CAPM model?...
Tri Co. has the following cost of debt structure: Please show all work. wd 0% 20%...
Tri Co. has the following cost of debt structure: Please show
all work.
wd
0%
20%
30%
40%
50%
rd
0.0%
9.0%
10.0%
11.0%
12.0%
The market risk premium is 4.5%, the risk free rate is 5%, beta
of unleveraged firm is 1.20, Hamada’s equation b= bU [1
+ (1 - T)(wd/we)]. Tax rate T = 40%.
Please use the above information to answer following
questions:
a. If the firm uses 40% debt, what is the cost of equity of...
Current Capital Structure and WACC Weight Cost Weighted Cost Debt 10% 6.50% 0.65% Preferred 15% 14%...
Current Capital Structure and WACC
Weight
Cost
Weighted Cost
Debt
10%
6.50%
0.65%
Preferred
15%
14%
2.10%
Equity
75%
18%
13.50%
Total
100%
16.25% WACC
Target Capital Structure and WACC
Weight
Cost
Weighted Cost
Debt
40%
6.5%
2.6%
Preferred
10%
14%
1.40%
Equity
50%
18%
9%
Total
100%
13% WACC
What are some differences between these two structures? What
issues could the target capital structure create?
if before tax cost of debt rd = 0.12, tax rate (T)=35%, what is the after...
if before tax cost of debt rd = 0.12, tax rate (T)=35%, what is
the after tax cost of debt?
How would each of the following scenarios affect a firms cost of debt , Rd (1-T)...
How would each of the following scenarios affect a firms cost of
debt , Rd (1-T) , its cost of equity, Rs, and its WACC. Indicate
with a (+), a minus (-), or a zero (0) whether the factor would
raise , lower, or have indeterminate effect on the item in
question. Assume for each answer that other things are held
constant, even though in some instances this would probably not be
true. Be prepared to justify your answer but...
i) A company is financed 60% by debt and 40% by equity. The pre-tax cost of...
i) A company is financed 60% by debt and 40% by equity. The
pre-tax cost of debt is currently 10%. The Finance Director has
stated that the weighted average cost of capital for the company is
9.6%. What is the cost of equity? Assume the tax rate is
40%.
a) 11.4%
b) 9.8%
c) 12%
d) 15%
ii) Ashley Ardern has been researching a vaccine for Covid-19.
The cost of the research efforts has already amounted to
$500,000.
If Ashley...
Stock: Terreno Realty Corporation (TRNO) Rd=2.40% (cost of debt) Re=4.41% (cost of equity) WACC=3.94% This is...
Stock: Terreno Realty Corporation (TRNO)
Rd=2.40% (cost of debt)
Re=4.41% (cost of equity)
WACC=3.94%
This is the full question, I only need part 3 two-stage
FCFE:
Using the cost of equity, cost of debt, and WACC you computed in
PHASE I, compute absolute valuation measures for the value of your
stock. You must complete all four valuation measures. You may
adjust your estimates of re, rd, and WACC if you find that a
different estimate makes sense. However, you must...
The company has a $300 million debt, with an annual coupon rate of 14% and a...
The company has a $300 million debt,
with an annual coupon rate of 14% and a remaining life of 10 years.
The indenture allows redemption at the call premium of 5%. Suppose
the firm can issue a new debt of $250 million with the coupon rate
of 11.5%. Flotation cost of the new bond issue is $2.75 million.
There is two months overlap, and Pygmalion’s tax rate is 36%, cost
of capital is 20% and the T-bill rate is 9%....
A company has a cost of debt of 13.56% and a WACC of 18.58%. The debt-equity...
A
company has a cost of debt of 13.56% and a WACC of 18.58%. The
debt-equity ratio is 0.07. The tax rate is 36%. What is the cost of
equity?
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