Question

Malkin Corp. has no debt but can borrow at 8.25 percent. The firm’s WACC is currently 15 percent, and there is no corporate tax. a. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.) Cost of equity % b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % c. If the firm converts to 50 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % d. What is the company’s WACC in parts (b) and (c)? (Do not round intermediate calculations and enter your answers as a percent rounded to the nearest whole number, e.g., 32.) WACC 30 percent % 50 percent %

Answer #1

Malkin Corp. has no debt but can borrow at 6.75 percent. The
firm’s WACC is currently 12 percent, and there is no corporate
tax.
a. What is the company’s cost of equity?
(Do not round intermediate calculations and enter your
answer as a percent rounded to the nearest whole
number, e.g., 32.)
Cost of equity
%
b. If the firm converts to 10 percent debt, what will its
cost of equity be? (Do not round intermediate calculations
and enter your...

Irving Corp. has no debt but can borrow at 7 percent. The firm’s
WACC is currently 13 percent, and there is no corporate tax.
a. What is the company’s cost of equity? (Do not round
intermediate calculations and enter your answer as a percent
rounded to the nearest whole number, e.g., 32.)
b. If the firm converts to 30 percent debt, what will its cost
of equity be? (Do not round intermediate calculations and enter
your answer as a percent...

Citee Corp. has no debt but can borrow at 5.2 percent. The
firm’s WACC is currently 8.9 percent, and the tax rate is 24
percent.
a.
What is the company’s cost of equity? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b.
If the firm converts to 25 percent debt, what will its cost of
equity be? (Do not round intermediate calculations and
enter your answer as a...

Shadow Corp. has no debt but can borrow at 5.2 percent. The
firm’s WACC is currently 8.9 percent and the tax rate is 24
percent.
a.
What is the company’s cost of equity? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b.
If the firm converts to 25 percent debt, what will its cost of
equity be? (Do not round intermediate calculations and
enter your answer as a...

Citee Corp. has no debt but can borrow at 6.7 percent. The
firm’s WACC is currently 9.3 percent, and the tax rate is 23
percent.
a.
What is the company’s cost of equity? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b.
If the firm converts to 25 percent debt, what will its cost of
equity be? (Do not round intermediate calculations and
enter your answer as a...

Citee Corp. has no debt but can borrow at 6.5 percent. The
firm’s WACC is currently 8.7 percent, and the tax rate is 23
percent. a. What is the company’s cost of equity? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.) b. If the firm converts
to 30 percent debt, what will its cost of equity be? (Do not round
intermediate calculations and enter your answer as a percent...

Shadow Corp. has no debt but can borrow at 6.8 percent. The
firm’s WACC is currently 8.6 percent, and the tax rate is 35
percent.
a. What is the firm’s cost of equity? (Do not
round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Cost of equity %
b. If the firm converts to 30 percent debt, what will
its cost of equity be? (Do not round intermediate
calculations. Enter your answer as...

Braxton Corp. has no debt but can borrow at 7.8 percent. The
firm’s WACC is currently 9.6 percent, and the tax rate is 35
percent.
a)What is the company’s cost of equity? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places, e.g., 32.16.)
b) if the firm converts to 30 percent debt, what will its cost
of equity be?
c) If the firm converts to 50 percent debt,
what will its cost of...

Crosby Industries has a debt–equity ratio of 1.4. Its WACC is 14
percent, and its cost of debt is 9 percent. There is no corporate
tax.
a. What is the company’s cost of equity capital?
(Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
Cost of equity
%
b. What would the cost of equity be if the
debt–equity ratio were 2? (Do not round intermediate
calculations and enter your...

Fyre, Inc., has a target debt−equity ratio of 1.80. Its WACC is
8.7 percent, and the tax rate is 40 percent.
a.
If the company’s cost of equity is 15 percent, what is its
pretax cost of debt? (Do not round intermediate
calculations. Enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
Cost of debt
%
b.
If instead you know that the aftertax cost of debt is 7.1
percent, what is the cost of equity?...

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