c. What will the marginal cost of capital be immediately after that point? (Equity will remain at 45 percent of the capital structure, butwill all be in the form of new common stock, Kn.)Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.Marginal cost of capital%d. The 5.0 percent cost of debt referred to above applies only to the first $36 million of debt. After that, the cost of debt will be 8.5percent. At what size capital structure will there be a change in the cost of debt?Note: Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").Capital structure size (Z)millione. What will the marginal cost of capital be immediately after that point? (Consider the facts in both parts cand d.)Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.Marginal cost of capital%

C. To calculate the marginal cost of capital, we need to first find the cost of equity using the…

Answered: c. What will the marginal cost of…

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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6. Calculate and explain the Weighted Average Cost of Capital (WACC)based on the details below.a. Market Value of Equity: $7Mb. Market Value of Debt: $3Mc. Cost of equity 7%d. Cost of debt: 5%e. Tax Rate: 32 (use .32 for calculation)
A company hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $2.45; P0 = $28.96; and g = 4.06% (constant). What is the cost of equity from retained earnings? Do not round your intermediate calculations. Express your answer as a percent rounded to two decimal places. (For example, 4.567% should be entered as 4.57)
Evans Technology has the following capital structure. Debt Common equity The aftertax cost of debt is 8.50 percent, and the cost of common equity (in the form of retained earnings) is 15.50 percent. a. What is the firm's weighted average cost of capital? Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. 48% 60 Debt Common equity Weighted average cost of capital Weighted Cost % % An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the aftertax cost of debt is 9.50 percent, and the cost of common equity (in the form of retained earnings) is 17.50 percent. b. Recalculate the firm's weighted average cost of canital
1. Accounting rate of return. (Round your answer to 2 decimal places.)2. Payback period. (Round your answer to 2 decimal places.)3. Net present value (NPV). (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)4. Recalculate the NPV assuming BBS's cost of capital is 12 percent. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)
Given the information below. Find the Weighted Average Cost of Capital Market Value of Equity = $22,000,000; Debt = $15,000,000; Cash or Cash Equivalents = $15,000,000 iD = 0.10 or 10% iMKT = 0.17 or 17% tCorp = 0.30 or 30% bK = 1.5 IRF = 0.02 = 2%
A company hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $2.45; P0 = $28.96; and g = 4.06% (constant). What is the cost of equity from retained earnings? Do not round your intermediate calculations. Express your answer as a percent rounded to two decimal places.
Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decima) places.) b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.)
Evans Technology has the following capital structure. Debt Common equity 30% 70 The aftertax cost of debt is 7.50 percent, and the cost of common equity (in the form of retained earnings) is 14.50 percent. a. What is the firm's weighted average cost of capital? Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Common equity Weighted average cost of capital Weighted Cost % 0.00 % Q Search An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the aftertax cost of debt is 8.50 percent, and the cost of common equity (in the form of retained earnings) is 16.50 percent. b. Recalculate the firm's weighted average cost of capital. O Che
Fill in the table using the following information. Assets required for operation: $3,800 Case A-firm uses only equity financing Case B firm uses 30% debt with a 10% interest rate and 70% equity Case C-firm uses 50% debt with a 12% interest rate and 50% equity If your answer is zero, enter "O". Round your answers for monetary values to the nearest cent. Round your answers for percentage values to one decimal place. A B C Debt outstanding $ 2$ Stockholders' equity 3 Earnings before interest and taxes $608.00 $608.00 $608.00 Interest expense $ $ Earnings before taxes $ 24 $ Taxes (40% of earnings) $ $ $ Net earnings $ Return on stockholders' equity % % %24 %24 %24 %24 %24 %24 %24 %24 %24
Use this problem to answer numbers 1 to 3. (1) If the cost of equity were 12%, then the weighted average cost of capital under Arrangement #1, to the nearest full percentage point, would be
If the cost of capital is 14%, what is the PV of $254 paid in year 8? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value es
In the following balance sheet, estimate the impact on the economic value of equity (EVE).if all interest rates decrease by 3%, EVE=$( )Loan A (7.5%, 5 year) = $500Deposit B (5%, 2 year) = $500 Total Assets = $500Total Liabilities = $500 a. 36.73 b. 38.5 c. 40.22 d. 41.77

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