Question

Heinz Incorporation has expected earnings before interest and taxes of $2,843,270, an unlevered cost of capital of 10.2 percent, and a tax rate of 25 percent. The company has $7,900,000 of debt that carries a 6.6 percent coupon. The debt is selling at par value. What is the value of this company? $24,412,506 $23,756,980 $22,881,397 $20,362,114 $25,644,382

Answer #1

L.A. Clothing has expected earnings before interest and taxes of
$2,300, an unlevered cost of capital of 12 percent
and a tax rate of 33 percent. The company also has $2,900 of debt
that carries an 8 percent coupon. The debt is selling at par value.
What is the value of this firm?

Hanover Industries has expected earnings before interest and
taxes of $630,300, an unlevered cost of equity of 14.7 percent, and
a combined tax rate of 23 percent. The company also has 11,000
senior bonds outstanding that carry a coupon rate of 7 percent. The
debt is selling at par value. What is the value of this company?
What is the target capital structure of the firm if the levered
cost of equity is 17.25? Assume MM with taxes holds.

Hanover Industries has expected earnings before interest and
taxes of $630,300, an unlevered cost of equity of 14.7 percent, and
a combined tax rate of 23 percent. The company also has
11,000senior bonds outstanding that carry a coupon rate of 7
percent. The debt is selling at par value. What is the value of
this company? What is the target capital structure of the firm if
the levered cost of equity is 17.25? Assume MM with taxes
holds.

5. Hanover Industries has expected earnings before interest and
taxes of $630,300, an unlevered cost of equity of 14.7 percent, and
a combined tax rate of 23 percent. The company also has 11,000
senior bonds outstanding that carry a coupon rate of 7 percent. The
debt is selling at par value. What is the value of this company?
What is the target capital structure of the firm if the levered
cost of equity is 17.25? Assume MM with taxes holds.

Jemisen's firm has expected earnings before interest and taxes
of $1,400. Its unlevered cost of capital is 13 percent and its tax
rate is 34 percent. The firm has debt with both a book and a face
value of $1,800. This debt has a 7 percent coupon and pays interest
annually. What is the firm's weighted average cost of capital?
A) 12.03 percent
B) 12.88 percent
C) 12.50 percent
D) 11.97 percent
E) 12.20 percent

Blaine Shoes, an unlevered firm, has a cost of capital of 15
percent and earnings before interest and taxes of $500,000. Salem
Shoes, A levered firm, has the same operations and assets has face
value of debt of $7000,000 with a coupon rate of 7.5 percent that
sells at par. The applicable tax rate is 35 percent. What is the
value of the levered firm?

A company has an unlevered cost of capital of 12 percent, a tax
rate of 34 percent, and expected earnings before interest and taxes
of $1,300. The company has $2,200 in bonds outstanding that have an
8 percent coupon and pay interest annually. The bonds are selling
at par value.
What is the cost of equity?
How do you calculate this?

An unlevered firm has a cost of capital of 16% and earnings
before interest and taxes of $225,000. A levered firm with the same
operations and assets has both a book value and a face value of
debt of $850,000 with an 8% annual coupon. Assume no taxes, no
bankruptcy. What is the value of equity for the levered firm?
Select one:
A. 624,250
B. 556,250
C. 850,000
D. 556,250

Johnson Tire Distributors has an unlevered cost of capital of 13
percent, a tax rate of 35 percent, and expected earnings before
interest and taxes of $1,900. The company has $3,600 in bonds
outstanding that have a 6 percent coupon and pay interest annually.
The bonds are selling at par value. What is the cost of equity?
13.76 percent
15.29 percent
10.70 percent
9.17 percent
12.23 percent

(urgent!!) Wholesale Supply has earnings before interest and
taxes of $148,600. Debt is $220,000. The unlevered cost of equity
is 13.6 percent while the pretax cost of debt is 7.4 percent. The
tax rate is 21 percent. What is the weighted average cost of
capital? (Hint: Find RE first)

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