FINANCE1A6th Question 4. Calculate the degree of financial leverage for a firm with EBIT of $6,000,000, fixed cost of $3,000,000, interest expense of $1,000,000, preferredstock dividends of 800,000, and a 40 percent tax rateO 6.009.001.431.205. What is the current price of a share of stock when the current dividend is $4.75, the growth rate is 7 percent, and the investor's required rate of return is11 percent?$118.75$43.16$46.20$127.066. The market value of Company T's equity is $15.0 million, and the market value of its risk-free debt is $5.0 million. If the required rate of return on theequity is 20.0% and on the debt is 8.0%, calculate the company's cost of capital. (Assume no taxes)17.00%20.00%8.10%9.30%

Weighted average cost of capital(WACC) is the firm's overall cost of capital taking into…

6. The market value of Company T's equity is $15.0 million, and the market value of its risk-free debt is $5.0 million. If the required rate of return on the equity is 20.0% and on the debt is 8.0%, calculate the company's cost of capital. (Assume no taxes) 17.00% O 20.00% 8.10% 9.30%

6. The market value of Company T's equity is $15.0 million, and the market value of its risk-free debt is $5.0 million. If the required rate of return on the equity is 20.0% and on the debt is 8.0%, calculate the company's cost of capital. (Assume no taxes) 17.00% O 20.00% 8.10% 9.30%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 13P

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Question

FINANCE1A

6th Question

4. Calculate the degree of financial leverage for a firm with EBIT of $6,000,000, fixed cost of $3,000,000, interest expense of $1,000,000, preferred
stock dividends of 800,000, and a 40 percent tax rate
O 6.00
9.00
1.43
1.20
5. What is the current price of a share of stock when the current dividend is $4.75, the growth rate is 7 percent, and the investor's required rate of return is
11 percent?
$118.75
$43.16
$46.20
$127.06
6. The market value of Company T's equity is $15.0 million, and the market value of its risk-free debt is $5.0 million. If the required rate of return on the
equity is 20.0% and on the debt is 8.0%, calculate the company's cost of capital. (Assume no taxes)
17.00%
20.00%
8.10%
9.30%

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