Fundamentals Of Corporate Finance, 9th Edition
9th Edition
ISBN: 9781260052220
Author: Richard Brealey; Stewart Myers; Alan Marcus
Publisher: McGraw-Hill Education
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Chapter 13, Problem 11QP
a)
Summary Introduction
To compute: The required
b)
Summary Introduction
To compute: The WACC (weighted average cost of capital) of the company.
c)
Summary Introduction
To compute: The rate of discount for an expansion of firm’s current business.
d)
Summary Introduction
To compute: The required rate of return of company O’s novel venture.
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b. Estimate the WACC assuming a tax rate of 21%.
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 4%, and investors believe that Okefenokee's debt is essentially free of default risk.
a. What is the required rate of return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a whole percent.)
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c. Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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Fundamentals Of Corporate Finance, 9th Edition
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