7777MuyPoco (MP) Inc. is a large conglomerate thinking of entering the Al/social media business, where it plans to finance projects with a debt - value ratio of 0.30. There is currently one firm in the Al/social media industry, EasyCell Corporation (ECC). ECC is financed with 40% debt and the rest in equity. The beta of ECC's equity is 0.90. ECC has a borrowing rate of 7%. MP Inc. expects to borrow for its Al/social media venture/project at 10%. The corporate tax rate for both firms is 30 %, the market risk premium is 12.0%, and the risk-free interest rate is 3%. What is weighted average cost of capital for the MP's Al/social media venture/project? Round to the nearest 0.00 %. Do not enter the % symbol; For example, if your result is 0.1432 then enter 14.32

7777MuyPoco (MP) Inc. is a large conglomerate thinking of entering the Al/social media business, where it plans to finance projects with a debt - value ratio of 0.30. There is currently one firm in the Al/social media industry, EasyCell Corporation (ECC). ECC is financed with 40% debt and the rest in equity. The beta of ECC's equity is 0.90. ECC has a borrowing rate of 7%. MP Inc. expects to borrow for its Al/social media venture/project at 10%. The corporate tax rate for both firms is 30 %, the market risk premium is 12.0%, and the risk-free interest rate is 3%. What is weighted average cost of capital for the MP's Al/social media venture/project? Round to the nearest 0.00 %. Do not enter the % symbol; For example, if your result is 0.1432 then enter 14.32

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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7. You work for the CEO of a new company that plans to manufacture and sell a new product, a watch that has an embedded TV set and a magnifying glass erystal. The issue now is how to finance the company, with only equity or with a mix of debt and equity. Expected operating income is S540,000. Other data for the firm are shown below. How much higher or lower will the firm's expected ROE be ifit uses some debt rather than all equity, i.e., what is ROEL. - ROEU? Do not round your intermediate calculations. 0% Deht, U Oper. income (EBIT) Required investment S540,000 $2,500,000 0.0% 60% Debt, L S540,000 $2,500,000 % Debt S of Debt S of Common equity 60.0% S0.00 $1,500,000 S1,000,000 $2,500,000 NA 35% Interest rate 10.00% Tax rate 35% a. 10.74% b. 13.57% c. 14.14% d. 11.88% e. 11.31%
Company ABC is looking to figure out its cost of equity. The company operates in the construction business where, based on a list of comparable firms, the average beta is 0.9. The comparable firms have an average debt-to-equity ratio of 0.5. Company ABC has a debt-to-equity ratio of 0.25 and a 30% tax rate. What is the ABC's Beta? O a. 0.67 O b. 0.9 OC 0.79 O d. 0.25
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Caddy manufacturing has a target debt equity ratio of .45. Its cost of equity is 10.3%, and its pre- tax cost of debt is 6.4%. If the tax rate is 21%, what is the company's WACC ? Pls type in computer! Thanks
Netglobe Ltd is a well established company providing telecommunications services. An analyst has collected the following information and wants to estimate the enterprise value of Netglobe using the discounted free cash flow (FCF) model: ● ● ● . . The cost of equity is 15%. The cost of debt is 6%. • The weighted average cost of capital is 10%. Using the discounted free cash flow model and the information above, the the enterprise value of Netglobe is $ million. Note: Please provide your answer with two decimal points in $ million the format of xx.xx (for example, if the answer is $12.34 million, type in 12.34). Netglobe's FCF was $16 million in year 0 (historical FCF in the year just passed). Netglobe expects its FCF to grow by 5% per year for the next three years (in year 1, year 2 and year 3). Netglobe expects its FCF to grow by 3% per year indefinitely thereafter. Assume all cash flows occur at the end of the year. ● 4
Consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses €10,000 of 12 percent debt. Both firms have €20,000 in assets, a 40 percent tax rate, and an expected EBIT of €3,000. Construct partial income statements, which start with EBIT, for the two firms. Firm U Firm L Assets €20,000 €20,000 Equity €20,000 €10,000 EBIT € 3,000 € 3,000 INT (12%) ? ? EBT ? ? Taxes (40%) ? ? NI € ? € ?
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You are tasked to see how debt financing impacts equity required return for SBC Inc. The unlevered Beta is 0.90 and tax rate is 25%. The market value of the firm is $400,000,000, while debt is $150,000,000 with equity being the remainder. A. Find the D/E ratio B. Find the levered Beta for SBC. (Not by excel)

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