olo3.CanvasAccounts payable$10,000,000Accruals$9,000,000Current liabilities$19,000,000Long-term debt (40,000 bonds, $1,000 par value)Total liabilities$40,000,000$59,000,000Common stock (10,000,000 shares)Retained earnings$50,000,000Total shareholders' equity$80,000,000Total liabilities and shareholders' equity$139,000,000The stock is currently selling for $15.25 per share, and its noncallable $1,000.00 par value, 20-year, 9.00% bonds with semiannual payments are sellingfor $930.41. The beta is 1.22, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return onthe stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 25%.Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of equity?O 10.65%O 11.01%O 11.74%O 12.10%O 12.46%« PreviousNextQuiz saved at 10:56pmSubmit Quiz000DDF8%23486R IA,Exhibit 10.1Assume thatno.have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups,and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.AssetsCurrent assets$38,000,000Net plant, property, and equipmentTotal assets$139,000,000Liabilities and EquityAccounts payable$10,000,000Accruals$9,000,000Current liabilities$19,000,000Long-term debt (40,000 bonds, $1,000 par value)$40,000,000Total liabilities$59,000,000Common stock (10,000,000 shares)$30,000,000Retained earnings$50,000,000Total shareholders' equity$80,000,000Total liabilities and shareholders' equity$139,000,000The stock is currently selling for $15.25 per share, and its noncallable $1,000.00 par value, 20-year, 9.00% bonds with semiannual payments are sellingfor $930.41. The beta is 1.22, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return onthe stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 25%.Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of equity?O 10.65%O 11.01%O 11.74%000000DDF4F5F3F2$%%#396

Capital asset pricing model is financial model which establishes a relationship between the risk…

Answered: jo un Refer to Exhibit 10.1. Based on…

jo un Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of equity? O 10.65% %10'II O O 11.74% O 12.10% O 12.46%

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter2: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 14SP

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Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets Current assets $38,000,000 Net plant, property, and equipment $101,000,000 Total assets $139,000,000 Liabilities and Equity Accounts payable $10,000,000 Accruals $9,000,000 Current liabilities $19,000,000 Long-term debt (40,000 bonds, $1,000 par value) $40,000,000 Total liabilities $59,000,000 Common stock (10,000,000 shares) $30,000,000 Retained earnings $50,000,000 Total shareholders' equity $80,000,000 Total liabilities and shareholders' equity $139,000,000 The stock is currently selling for $15.25 per share, and its noncallable $1,000.00 par value, 20-year, 9.00% bonds with semiannual payments are selling for $930.41. The beta is 1.22, the yield on a 6-month…
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Alcuin, Langwith and Halifax are firms involved in the production and sale of high-quality technical equipment for universities; the following are draft financial statements: Statement of financial position as at 31st March 2021      Alcuin Langwith     Halifax         £000         £000         £000 Assets Non-current assets Property, Plant and Equipment (note 1) 10,500 5,500 2,500 Investment in Langwith (note 2) 5,000                -                   -    Investment in Halifax (note 3) 3,000                -                   -    Current assets 1,500 1,000 500 Total assets 20,000 6,500 3,000 Equity and liabilities Equity Ordinary share capital (£1) 10,000 2,000 1,000 Retained earnings 7,000 3,750 750 Non-current liabilities 2,000   -      -    Current liabilities 1,000 750 1,250…
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Alcuin, Langwith and Halifax are firms involved in the production and sale of high-quality technical equipment for universities; the following are draft financial statements: Statement of financial position as at 31st March 2021      Alcuin Langwith     Halifax         £000         £000         £000 Assets Non-current assets Property, Plant and Equipment (note 1) 10,500 5,500 2,500 Investment in Langwith (note 2) 5,000                -                  -   Investment in Halifax (note 3) 3,000                -                  -   Current assets 1,500 1,000 500 Total assets 20,000 6,500 3,000 Equity and liabilities Equity Ordinary share capital (£1) 10,000 2,000 1,000 Retained earnings 7,000 3,750 750 Non-current liabilities 2,000 -   -   Current liabilities 1,000 750 1,250 Total equity and liabilities…
Alcuin, Langwith and Halifax are firms involved in the production and sale of high-quality technical equipment for universities; the following are draft financial statements: Statement of financial position as at 31st March 2021      Alcuin Langwith     Halifax         £000         £000         £000 Assets Non-current assets Property, Plant and Equipment (note 1) 10,500 5,500 2,500 Investment in Langwith (note 2) 5,000                -                   -    Investment in Halifax (note 3) 3,000                -                   -    Current assets 1,500 1,000 500 Total assets 20,000 6,500 3,000 Equity and liabilities Equity Ordinary share capital (£1) 10,000 2,000 1,000 Retained earnings 7,000 3,750 750 Non-current liabilities 2,000   -      -    Current liabilities 1,000 750 1,250…