If a bank has the following ratios, it can pay up to of its earnings as dividends. Tier 1 leverage = 4.7% Tier 1 common equity risk-based 7.2% %3D Tier 1 risk-based 8.3% Total capital risk-based 11% %3! %3D
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- A company had WACC (weighted average cost of capital) equal to 8. % If the company pays off mortgage bonds with an interest rate of 4% and issues an equal amount of new stock considered to be relatively risky by the market, which of the following is true? a. residual income will increase. b. ROI will decrease. c. WACC will increase. d. WACC will decrease.The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. Q1. ________is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation. Q2. Avery Co. has $3.9 million of debt, $2 million of preferred stock, and $2.2 million of common equity. What would be its weight on debt? a. 0.27 b. 0.25 c. 0.48 d. 0.20 Q1. Option 1 rS or Option 2 rD or Option 3 rP or Option 4 rE Please provide the correct answers. Thank you!a)Assume that the following data is extracted from the financial statements of Richy-Rich bank: equity is $350 million, interest expense is $115 million, provision for loan loss (P) is $35 million, noninterest income is $30 million, noninterest expense is $50 million and a tax rate is 33%. What is the minimum total interest income required to give a return on equity (ROE) of 20%? Show workings when necessary. b) Be-smart Bank reported an equity multipler ratio of 6.5 at the end of year 2021. If the bank’s total debt at the end of year 2021 was $5 million, how much of its assets were financed with equity? Show calculations when necessary. c) What are the main sources of funding for commercial banks? Using bullet points, classify these sources and briefly describe each category.
- Suppose that the Tier 1 equity ratio for a bank is 6%. What is the maximum dividend, as a percent of earnings, that can be paid if (a) there is no countercyclical buffer and (b) there is a 2.5% countercyclical buffer?For a particular firm, the purchasers of common stock require an 11% rate of return, bonds are sold at a 7% interest rate, and bank loans are available at 9%. Compute the cost of capital or WACC for the following capital structureA bank has risk-weighted assets or $425 million and the following sources of regulatory capital (in $ millions): Allowance for Loan Losses $3.02 Common Stock (Par) $0.85 Intermediate-Term Preferred Stock $4.87 Perpetual Preferred Stock $3.43 Subordinated Debt $3.24 Surplus $7.83 Undivided Profit $20.04 What is the bank's ratio of Tier 2 capital to risk-weighted assets? _______ . Calculate the answer by read surrounding text. Express in %, to the nearest 0.01%; drop the % symbol.
- The following data pertains to Xena Corp. Xena Corp. Total Assets $21,249 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity: Book Value $5,535 Market Value $23,247 Marginal Income Tax Rate 19% Market Beta 1.64 A. Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted-average cost of capital: B. Using the information from the table, determine the weight on equity capital that should be used to calculate Xena's weighted-average cost of capital.The basic WACC equation The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation. Raymond Co. has $1.4 million of debt, $3 million of preferred stock, and $1.2 million of common equity. What would be its weight on debt? 0.59 0.25 0.49 0.21Alpha Corporation has average annual free cashflows to the equity holder and to the firmof P3,000,000 and P3,350,000 respectively. Assuming that the weighted average cost ofcapital and actual return of on assets is 16.75% while the market return on Alpha's debt is7%, what is the value of its equity? a. P34,358,974.36 b.P15,000,000.00 c.P17,910,447.76 d.P20,000,000.00
- The following were gathered for estimating the cost of equity of KKK Corporation: Return on Treasury Bonds = 4%; Return on the Market = 10%; Return on KKK Bonds = 6%. Upon analysis, you determined that the beta of KKK shares relating to the market return is 1.2 while a risk premium of 4% should be given to KKK's investors over its creditors. How much is the cost of equity using the capital asset pricing model?What does tangible common equity reflect? Suppose that a bank has common stock of par value $200m with retained earnings of $3m and intangible assets of $4m. What will be tangible common equity ratio if total assets are $1000m? Do it correctly with explanationAnalyze and compare the following firms financial ratio results. Which seems to be in a better financial position? Why? Ratio Firm A Firm B Debt-To-Equity 0.65 2.23 Current Ratio 1.74 0.83 Net Profit Margin 8.07% 9.59% Return On Equity 12.81% 47.17% -
