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ABC requires an investment of $50,000 and borrows $20,000 at 6%. If the
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- Suppose that a company yields mean returns of 20% (equity), and 9% mean returns on every peso the company invests (debt) in a certain alternative. What would be the best decision if the MARR and ROR calculated is 12%?SIROM Scientific Solutions has $10 million of outstanding equity and $5 million of bank debt. The bank debt costs 5% per year. The estimated equity beta is 2. If the market risk premium is 9% and the risk-free rate is 3%, compute the weighted average cost of capital if the firm's tax rate is 30%.A firm raises capital by selling $35,000 worth of debt with flotation costs equal to 3% of its par value. If the debt matures in 15 years and has an annual coupon interest rate of 11%, what is the bond's YTM?
- Suppose Mechis Technologies has a capital structure of 40% equity and 60% debt with the following information: a Beta of 0.7, Market Risk Premium of 5%. Mechis's average long term debt pays a 5% annual coupon with fifteen years to maturity, currently selling for $980 (face value of $1,000). If Mechis's tax rate is 15% and the risk free rate is 3%, what is the Weighted Average Cost of Capital?XYZ Corp has a capital budget of $10M for next year. The company has a target capital structure of 65% Equity / 35% Debt. If net income next year is projected to be $9M and the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio?Suppose Riggley Corp. has a capital structure of 40% equity and 60% debt with the following information: a Beta of 0.7, Market Risk Premium of 5%. Riggley's average long term debt pays a 5% annual coupon with fifteen years to maturity, currently selling for $980 (face value of $1,000). If Riggley's tax rate is 15% and the risk free rate is 3%, what is the Weighted Average Cost of Capital?
- blue Industries has an EBIT of $12 million per year forecast in perpetuity. blue’s cost of equity is 15% and its tax rate is 28%. If Blue Industries borrows $30 million, what will be the value of the firm? Group of answer choices $76.4 million $66.0 million $80.0 million $57.6 million $30.8 millionSuppose the Machine Corp. has a capital structure of 80% equity and 20% debt with the following information: a Beta of 1.3, Market Risk Premium of 10%. Kamino's average long term debt pays a 10% annual coupon with ten years to maturity, currently selling for $800 (face value of $1,000). If Kamino's tax rate is 20% and the risk free rate is 2%, what is the Weighted Average Cost of Capital?Bob-Bye, Inc. has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The WACC is to be measured by using the following weights:: 40% long term debt, 10% preferred stock, and 50% common stock equity (retained earnings,new common stock or both). The firm’s tax is 30%. Debt: The firm can sell for P980, a 10-year, P1,000 par value bond paying annual interest at 13% coupon rate. A flotation cost of 3% of the par value is required in addition to the discount of P20 per bond. Preferred Stock: 8 percent (annual divided) preferred stock having a par value of P100 can be sold for P65. An additional fee of P2 per share must be paid to the underwriters. Common Stock: The firm’s common stock is currently selling for P50 per share. The dividend expected to be paid at the end of the coming year is P4 per share.. Its dividend payments which have been approximately 60% of earnings per share in each of the past 5…
- Sisters Ltd is planning to invest in a capital project, which will generate cash inflows of $15,000 in the 1st year, $22,000 in the 2nd year, and $25,000 in the 3rd year. The project ends after year 3. The company’s current debt to equity ratio is 0.8 with the cost of debt of 8% p.a. compounded annually. Sisters Ltd stock has a beta of 1.2. The risk-free rate is3% p.a. compounded annually and the expected market return is 12% p.a. compounded annually. The cost of equity of 10.5% p.a. compounded annually. The new debt to equity ratiois 1. What is the total present value of the project’s cash inflows?Shoobee, Inc. has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average of capital. The WACC it to be measured by using the following weights: 50% long term, 10% preferred stock, and 40% common stock equity (retained earnings, new common stock issuance, or both). The firm tax is 25%. Debt: The firm can sell for P980, a 10-year, P1,000 par value bond paying annual interest at 13% coupon rate. A flotation cost of 3% of the par value is required in addition to the discount of P20 per bond. Preferred stock: 8 percent (annual dividend) preferred stock having a par value of P100 can be sold for P65. An additional fee of P2.00 per share must be paid to the underwriters. Common stock: The firm’s common stock is currently selling for P50 per share. The recent dividend paid was P4.00 per share. Its dividend payments which have approximately 60% of earnings per share in each past 6 years follows: Year Dividend 2021 P4.00 2020 3.75…FCF is projected to be $100,000, $125,000 and $150,000 over the next three years. The enterprise value in three years is projected to be $1,000,000. The WACC is 8%. What is the total enterprise value of the firm? If this firm has borrowed $500,000, the value of the firm's equity must be what? Show your work.