Assume the company has weight of debt WD = 80%, cost
of debt RD = 15%,...
Assume the company has weight of debt WD = 80%, cost
of debt RD = 15%, for un-leveraged firm: Bu
=1; the company has Tax Rate = 40%, risk-free rate Rf =
4%, Market Return = 10%, free cash flow FCF0 = 200
million, growth rate g = 4%. Use the following formula for beta of
leveraged company: B = Bu [1+ (1-T) × (WD
/WS)], What is the WACC and what is the value of the
firm?
Please show...
4. Tri Co. has the following cost of debt structure:
wd
0%
20%
30%
40%
50%...
4. Tri Co. has the following cost of debt structure:
wd
0%
20%
30%
40%
50%
rd
0.0%
10.0%
12.0%
14.0%
15.0%
The market risk premium is 7%, the risk free rate is 4%, beta of
unleveraged firm is 1.10, Hamada’s equation b= bU [1 +
(1 - T)(wd/we)]. Tax rate T = 35%.
Please use the above information to answer following
questions:
a. If the firm uses 40% debt, what is the cost of equity of the
firm, based...
Tri Co. has the following cost of debt structure: The market
risk premium is 4.5%, the...
Tri Co. has the following cost of debt structure: The market
risk premium is 4.5%, the risk free rate is 5%, beta of unleveraged
firm is 1.20, Hamada’s equation b= bU [1 + (1 -
T)(wd/we)]. T=40%.
Please use the above information to answer following
questions:
wd
0%
20%
30%
40%
50%
rd
0.0%
9.0%
10.0%
11.0%
12.0%
If the firm uses 50% debt, what is the cost of equity of the
firm, based on CAPM model?
Cost of Equity...
Vandelay Industries is considering four average risk projects
with information below
related to their rates of...
Vandelay Industries is considering four average risk projects
with information below
related to their rates of return. Determine Vandelay
Industries' WACC.
INPUTS USED IN THE MODEL
Tax rate 30%
B-T rd 8%
Net Pps $35.00
Dps $5.00
P0 $50.00
D1 $2.50
g 5%
Vandelay's beta 1.1
Market risk premium, RPM 7.50%
Risk free rate, rRF 3.0%
Target capital structure from common stock 60%
Target capital structure from preferred stock 15%
Target capital structure from debt 25%
Calculate the cost of...
1. A firm has
a $400 million market capitalization and $250 million in debt. It
also...
1. A firm has
a $400 million market capitalization and $250 million in debt. It
also has $100 million in cash and short-term investments on the
balance sheet. The yield to maturity on its debt is 4%, the
corporate tax rate is 35%, and the required return on its equity is
14%. What is this firm’s WACC?
2. A firm’s WACC is 19%, its required return on equity
is 23%, and its after-tax cost of debt (i.e., effective cost after...
Mannheim Biotechnology Limited is expanding the business by
considering investing in some profitable projects. Stevenson, a...
Mannheim Biotechnology Limited is expanding the business by
considering investing in some profitable projects. Stevenson, a
project manager of Mannheim was asked to estimate the cost of
capital and evaluate the following projects
year
0
1
2
3
4
Project A
(100.00)
10.00
50.00
40.00
20.00
Project B
(200.00)
80.00
90.00
85.00
10.00
Project C
(300.00)
105.00
90.00
110.00
20.00
Albert, the Chief Financial Officer (CFO) of Mannheim has
provided him some relevant information.
The current bond price of Mannheim’s...
A thumbs up will be given:
Table 1
t
A
B
C
D
0
(14,900,000)...
A thumbs up will be given:
Table 1
t
A
B
C
D
0
(14,900,000)
(17,900,000)
(16,600,000)
(19,700,000)
1
4,980,000
5,990,000
3,850,000
6,400,000
2
4,980,000
6,210,000
4,990,000
5,880,000
3
4,510,000
6,250,000
6,860,000
6,800,000
4
4,510,000
4,700,000
4,990,000
6,650,000
Risk
High
Average
Low
Average
Table 1 shows the expected after-tax operating cash flows for
each project. All projects are expected to...
WACC Estimation The following table gives the balance sheet for
Travellers Inn Inc. (TII), a company...
WACC Estimation The following table gives the balance sheet for
Travellers Inn Inc. (TII), a company that was formed by merging a
number of regional motel chains. Travellers Inn: (Millions of
Dollars) Cash $ 10 Accounts payable $ 10 Accounts receivable 20
Accruals 15 Inventories 20 Short-term debt 0 Current assets $ 50
Current liabilities $ 25 Net fixed assets 50 Long-term debt 30
Preferred stock (50,000 shares) 5 Common equity Common stock
(3,800,000 shares) $ 10 Retained earnings 30...