Winter's Toyland has a debt-equity ratio of 1.00. The cost of debt is 8 percent and the required return on assets is 15 percent. What is the cost of equity if you ignore taxes? Write your answer as a percent rounded to two digits, but don't include the % sign (i.e. write 12.63, not 0.1263).
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A: value of equity = EBIT in perpetuity / cost of capital
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A: Given, The market value of debt is $3 million The market value of equity is $6 million.
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A: Given:ROE of firm =4.4%Debt to equity ratio=0.7Tax rate=35%Interest on debt =5%To compute:Operating…
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A: WACC (weighted average cost of capital) refers to the average cost that is paid by a company to…
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A: The cost of capital is the rate of return that a company gives on all its capital whether it is…
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A: A ratio that provides information about the company regarding the capability of payoff its debt…
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A: The question is related to Capital Structure. MM Approach corporate taxes:- MM later recognizes the…
Q: (a) Samson told you that the company's pre-tax cost of debt is 5.7%, calculated by annual coupon…
A: Number of bonds = 12,000 Semi-annual coupon payment = $28.5 Time of maturity = $1,000 Corporate tax…
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A: Companies can finance their project either through debt or equity. Financing through debt means…
Q: The Doll House has a pre-tax cost of debt of 7.9 percent and a return on assets of 11.7 percent. The…
A: A- 13.41 percent
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A: Using excel Rate function to calculate YTM of the bond
Q: Universal Foods has a debt-to-value ratio of 39%, its debt is currently selling on a yield of 5%,…
A: Weighted Average Cost of Capital(WACC) It is the overall cost of capital which includes the capital…
Q: The Morrit Corporation has $480,000 of debt outstanding, and it pays an interest rate of 8%…
A: A ratio analysis is one of the most effective techniques to evaluate a business's financial…
Q: Laurel, Inc., has debt outstanding with a coupon rate of 6.1% and a yield to maturity of 7.2%. Its…
A: Effective after tax cost of debt = Before tax cost of debt (YTM) * (1- tax rate)
Q: What is Morrit's TIE rati
A: The time's interest earned (TIE) is an efficiency ratio that measures the ability of a…
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A: Yield to maturity refers to the internal rate of return which is earned by the investor who makes…
Q: your firm has a debt-equity ratio of .75. your pre tax cost of debt is 8.5% and your unlevered…
A: Computation of the cost of levered equity:Hence, the levered cost of equity is 19.88%.
Q: Summit Builders has a market debt-equity ratio of 0.25, a corporate tax rate of 40%, and pays 7%…
A: Weight of debt = Debt/ (Debt + equity) Weight of debt = 0.25/1.25 =20%
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A: Yield to maturity of the bond is the return which investors would get I the bond is held till…
Q: the backwoods lumber co. has a debt equity ratio of .80. the firm's required return on assets is 12%…
A: Debt to equity ratio is 0.8, required return is 12% and cost of equity is 15.68%Since, debt / equity…
Q: Braxton Corp. currently has one million shares outstanding but no debt. If needed, however, the…
A: WACC = Weight in Equity * Cost of equity + Weight in debt *Cost of debt * (1- tax)
Q: Austin's Cookies has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is…
A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…
Q: ROSE has no debt, its shareholders require a return of 10%, and EBIT of $25,000 which is paid…
A: The cost of equity is calculated with the help of following formula Cost of Equity = Net Income…
Q: The Morrit Corporation has $540,000 of debt outstanding, and it pays an interest rate of 11%…
A: Financial management consists of directing, planning, organizing and controlling of financial…
Q: you were hired as a consultant to ABC Company, whose target capital structure is 35% debt, 15%…
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Q: Seattle Health Plans currently uses zero-debt financing. Its operating profit is $1 million, and it…
A: Capital structure can be defined as the structure that depicts the proportion of debt and equity…
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A: Before tax cost of debt is yield to maturity of debt that is the rate which is given by debt when it…
Q: J&R Renovation, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding…
A: Let face value be $1000 Price of bond = 109% of face value = $1090 Time = 20 years ; semi annual…
Q: The Morrit Corporation has $450,000 of debt outstanding, and it pays an interest rate of 10%…
A: Financial management consists of directing, planning, organizing and controlling of financial…
Q: Let’s walk through an example and compute your post-tax returns. Suppose $2 million of your…
A: EBIT stands for Earnings before interest and taxes which states the profitability of the business…
Q: Nobleford Inc. is trying to determine its cost of debt. The firm has a debt issue outstanding with…
A: After tax cost of debt = Before tax cost of debt * (1-tax rate) Before tax cost of debt = YTM of the…
Q: The Morrit Corporation has $480,000 of debt outstanding, and it pays an interest rate of 8%…
A: The times' interest earned ratio: The times' interest earned ratio is a measure of a firm's ability…
Q: We've found that the total value of VetaTaco is $2 million. The firm has $600,000 of debt financing.…
A: Total value (V) = $2,000,000 Debt value (D) = $600,000 Equity value (E) = $2,000,000-600,000 =…
Q: Once Bitten Corp. uses no debt. The weighted average cost of capital is 5.2 percent, and the…
A: EBIT are returns available to an entity before paying any cost of finance to debtholders. EBIT shows…
Q: The Morrit Corporation has $450,000 of debt outstanding, and it pays an interest rate of 11%…
A: Times interest earned is the ratio of earnings before interest, tax, depreciation and amortisation…
Q: I had asked this question previously but the answer was incorrect from what my professor had put on…
A: Calculation of Pretax Cost of Debt:Assuming the pretax cost of debt as X.The pretax cost of debt is…
Q: What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your…
A: Information Provided: Term = 20 years Face value = 100 Price = 108 Coupon rate = 5% (semi-annual…
Q: addy manufacturing has a target debt equity ratio of .45. Its cost of equity is 10.3%, and its pre-…
A: WACC is the average cost of capital which can be calculated as follows WACC =Weight of equity*Cost…
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A: Computation of levered equity cost:Hence, the levered equity cost is 15.98%.
Q: Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue…
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Q: The Tree House has a pretax cost of debt of 6.1 percent and a return on assets of 10.4 percent. The…
A: Cost of equity is the cost of raising new finance by way of a new equity issue. It is the cost of…
Q: The DENC Corporation has the unlevered cost equity of 10%. The company wants to expand its operation…
A: A ratio that helps to evaluate a firm’s leverage by comparing the firm’s total liabilities to its…
Q: The DENC Corporation has the unlevered cost equity of 10%. The company wants to expand its operation…
A: given, ru=10%re=12%tax=30%rd= 6%
Q: Cowen Company has EBIT of 600,000, company's Debt-to-equity ratio (market value) is 0.6, and the…
A: Meaning of cost of capital:- It represents the return of a company that needs to achieve in order…
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- Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.Butler, Inc., has a target debt-equity ratio of 1.40. Its WACC is 9.5 percent, and the tax rate is 23 percent. a. If the company’s cost of equity is 13.3 percent, what is its pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If instead you know that the aftertax cost of debt is 5.5 percent, what is the cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt:____% b. Cost of equity:____%Starset, Inc., has a target debt-equity ratio of .80. Its WACC is 9.1 percent, and the tax rate is 25 percent. a.If the company's cost of equity is 13 percent, what is its pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.If instead you know that the aftertax cost of debt is 5.8 percent, what is the cost of equity?
- Kose, Inc., has a target debt-equity ratio of 1.31. Its WACC is 8.1 percent, and the tax rate is 22 percent. a. If the company’s cost of equity is 12 percent, what is its pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If instead you know that the aftertax cost of debt is 5.8 percent, what is the cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Ursala, Incorporated, has a target debt-equity ratio of 1.20. Its WACC is 8.7 percent, and the tax rate is 25 percent. a. If the company’s cost of equity is 13 percent, what is its pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If instead you know that the aftertax cost of debt is 5.8 percent, what is the cost of equity?Bento, Inc., has a target debt-equity ratio of .65. Its cost of equity is 16 percent, and its cost of debt is 5 percent. If the tax rate is 23 percent, what is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC:______%
- Starset, Incorporated, has a target debt-equity ratio of 0.76. Its WACC is 10.5 percent, and the tax rate is 32 percent. If the company's cost of equity is 14.5 percent, what is the pretax cost of debt? If instead you know that the aftertax cost of debt is 6.7 percent, what is the cost of equity?Ursala, Incorporated, has a target debt-equity ratio of 1.25. Its WACC is 8.4 percent and the tax rate is 23 percent. If the company’s cost of equity is 12.4 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 3.6 percent, what is the cost of equity?Fama's Llamas has a WACC of 8.8 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 6.8 percent. The tax rate is 22 percent. What is the company's target debt - equity ratio? Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g .. 32.1616.
- Austin's Cookies has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes. Format as a percentage, round to two places past the decimal point, and format as "X.XX"Kountry Kitchen has a cost of equity of 12.7 percent, a pretax cost of debt of 5.6 percent, and the tax rate is 21 percent. If the company's WACC is 9.22 percent, what is its debt-equity ratio?ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to maturity that is quoted at 111.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 8.4 percent annually. a. What is the company’s pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 25 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)