Question

the proportions of the market value of the firm's assets financed via debt, common stock, and preferred stock are called the firm's

Answer #1

the proportions of the market value of the firm's assets
financed via debt, common stock, and preferred stock are called the
firm's **Capital structure weights**

The assets of any firm can be financed via debt, common stock or preferred stock. The proportion of the structure financed via different methods of financing is capital structure weight.

Let's say a firm has a market value of $100.

$40 worth of assets are financed via debt, $50 worth of assets are financed via common stock and $10 worth of assets are financed via preferred stock. Then the proportions ie. 40%, 50% and 10% respectively are called the firm's capital structure weights

Q1. Firm XYZ is currently financed entirely with equity. The
market value of the firm's assets and equity is ?? = ?? = 500, and
the expected return on the firm's assets and equity is ?? = ?? =
12.5 percent. Suppose the firm issues debt with a value of ? = 200,
and uses the proceeds to retire equity. The market value of the
firm remains the same, ?? = ?? + ? = 500. If the expected return...

The firm's target capital structure is the mix of debt,
preferred stock, and common equity the firm plans to raise funds
for its future projects. The target proportions of debt, preferred
stock, and common equity, along with the cost of these components,
are used to calculate the firm's weighted average cost of capital
(WACC). If the firm will not have to issue new common stock, then
the cost of retained earnings is used in the firm's WACC
calculation. However, if...

Assume the market
value of a firm's preferred stock, equity, and debt are$2 billion,
$6 billion, and $13 billion, respectively. The firm has a beta of
1.7, the market return is 11%, and the risk-free rate of interest
is 3%. The firm's preferred stock pays a dividend of $4 each year
and trades at a price of $30 per share. The firm's debt trades with
a yield to maturity of 8.0%. What is the firm's weighted average
cost of capital...

AllCity, Inc., is financed 38% with debt, 13% with preferred
stock, and 49% with common stock. Its cost of debt is 5.8%, its
preferred stock pays an annual dividend of $2.48 and is priced at
$25. It has an equity beta of 1.1. Assume the risk-free rate is
1.9 %, the market risk premium is 7.1% and AllCity's tax rate is
35%. What is its after-tax WACC? Note: Assume that the firm will
always be able to utilize its full...

All City, Inc., is financed 45% with debt, 6% with preferred
stock, and 49% with common stock. Its cost of debt is 5.8%, its
preferred stock pays an annual dividend of $2.52 and is priced at
$29. t has an equity beta of 1.13. Assume the risk-free rate is
2.1%, the market risk premium is 7.3% and All City's tax rate is
35%. What is its after-tax WACC?

AllCity, Inc., is financed
41%
with debt,
9%
with preferred stock, and
50%
with common stock. Its cost of debt is
6.5%,
its preferred stock pays an annual dividend of
$2.55
and is priced at
$33.
It has an equity beta of
1.18.
Assume the risk-free rate is
2.5%,
the market risk premium is
7.3%
and AllCity's tax rate is
35%.
What is its after-tax WACC?
Note: Assume that the firm will always be able to utilize its
full interest...

AllCity, Inc., is financed
40%
with debt,
10%
with preferred stock, and
50%
with common stock. Its cost of debt is
6%,
its preferred stock pays an annual dividend of
$2.50
and is priced at
$30.
It has an equity beta of
1.1.
Assume the risk-free rate is
2%,
the market risk premium is
7%
and AllCity's tax rate is
35%.
What is its after-tax WACC?
Note: Assume that the firm will always be able to utilize its
full interest...

A firm's assets have a beta of 0.60. The market value of the
firm's equity is $1.2 billion and the market value of the firm's
debt is $900 million. If the corporate tax rate = 0, what is the
beta of the firm's equity?

1)As the debt ratio increases:
a. fewer assets are debt- financed, and the ratio of
debt-to-equity increases
b. fewer assets are debt- financed, and the ratio of
debt-to-equity decreases
c. more assets are debt- financed, and the ratio of
debt-to-equity increases
d. more assets are debt- financed, and the ratio of
debt-to-equity decreases
2)Which of the following statements is true about hedge
funds?
a. Hedge funds are mutual funds that specialize in derivative
investments designed primarily for hedging purposes.
b....

A firm's new financing will be in proportion to the market
value of its current financing shown below.
Carrying Amount
($000 Omitted)
Long-term debt $7,000
Preferred stock (100,000 shares) 1,000
Common stock (200,000 shares) 7,000
The firm's bonds are currently selling at 80% of par,
generating a current market yield of 9%, and the corporation has a
40% tax rate. The preferred stock is selling at its par value and
pays a 6% dividend. The common stock has a current...

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