First National Bank Assets Liabilities and Owners' Equity Reserves $1,800 Deposits $16,000 Loans $9,000 Debt $1000 Short-term securities $7,000 Capital (owners' equity) $800 If the market value of Short-term securities fall to $6,800. Then the percentage change of the leverage ratio is: a. 31.83% b. 29.33% C. -29.33% d. -31.83% е. 200$ f. -200$ g. There is not enough information to find the answer a d. OOOOO
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- Destin Company Information: Total Assets $940,000 Total Liabilities $600,000 Cost of debt 5.8% Risk-free rate 1.97% Beta 0.89 Market Return 10% A) Using CAPM, what is cost of equity? (so you are not confused, the opportunity cost of using equity is the return we were expecting to receive on the equity). a)8.03% b)7.77% c) 9.12% d) 8.9% B) What is Destin's Weighted Average Cost of Capital? a) 6.22% b) 5.89% c) 6.07% d) 5.72%Consider the following average annual returns: Investment Average Return 23.4% Small Stocks S&P 500 13.7% 7.4% Corporate Bonds Treasure Bonds Treasury Bills What is the excess return for corporate bonds? O A. 0% B. 3.1% C. 6.2% O D. 1.6% 6.1% 4.3%Liabilities and Shareholders' Equity 8,000.00 Equity 6,750.00 Suppose the maintenance margin is 34%. How far could the stock price fall before the investor would get a margin call? Assume that the stock is initially priced at $25 per share. Assets Value of Stocks $ A. $26.27. B. $24.37. C. $22.46. D. $20.54. 14,750.00 Loan from Broker $ $
- Problem 13-2 WACC (LO1) Here is some information about Stokenchurch Inc.: Beta of common stock = 1.5 Treasury bill rate = 4% Market risk premium = 6.8% Yield to maturity on long-term debt = 9% Book value of equity = $370 million Market value of equity = $740 million Long-term debt outstanding = $740 million Corporate tax rate = 21% What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)SECTION BI Question 2 Your analysis of Exxa Capital Berhad's indicated that the beta is 1.6. The risk-free rate instrument return is 3.85% and the current market return is 8.15%. The following is the capital structure of Exxa Capital Berhad: 4 Capital Bonds Details RM900 per unit and total outstanding bond issue is 3,000 units Total valuation is RM2.5 million Total value of outstanding common stock is RM12 million Preferred stocks Common stocks Table 1: Exxa Capital's Capital Structure The company's tax rate is 24%. Cost of Capital 6.89% 9.5% 6.14%Company CouponRate MarketPrice TimeSince LastInterest AccruedInterest Commissionper Bond BondsSold TotalPrice Company 4 10.925% 77.00 85 days $ $11.00 15
- 1:15:30 ped bok int ences Suppose that XTel currently is selling at $50 per share. You buy 700 shares using $28,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 9%. Required: a. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $56; (ii) $50; (ii) $44? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) (i) Percentage gain (ii) Percentage gain (iii) Percentage gain % % % b. If the maintenance margin is 20%, how low can XTel's price fall before you get a margin call? (Round your answer to 2 decimal places.) PriceProblem 13-5 Calculating WACC (LO1) The total book value of WTC’s equity is $7 million, and book value per share is $14. The stock has a market-to-book ratio of 1.5, and the cost of equity is 12%. The firm’s bonds have a face value of $4 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)First National Bank Assets Liabilities Rate-sensitive $80 million $50 million Fixed-rate $20 million $50 million according to the above balance sheet, if interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will increase by $___ million (put a negative sign if it is a decrease)
- Remaining Time: 80:36:08 A firm currently has a debt-equity ratio of 1/2. The debt, which is virtually riskless, pays an interest rate of 7 %. The expected rate of return on the equity is 12 %. What is the Weighted-Average Cost of Capital if the firm pays no taxes? Enter your answer as a percentage rounded to two decimal places. Do not include the percentage sign in your answer. WACC = NumberTime remaining: 00:09:14 Finance You are choosing between these four investments and you want to be 95% certain that you do not lose more than 8.00% on your investment. Which investments could you choose? Small StocksS&P 500Corporate BondsT-Bills 11.71% 6.16% Average return Standard Deviation of returns39.25% 18.04% 3.39% 3.12% 19.76% 6.36% A. All of the investments. B. Corporate Bonds and T-Bills. C. Small Stocks and S&P 500. D. Corporate Bonds and S&P 500. E. T-Bills only.Question 1Firm A’s capital structure contains 20% debt and 80% equity. Firm B’s capital structurecontains 50% debt and 50% equity.Both firms pay 7% annual interest on their debt. Firm A’s shares have a beta of 1.0and Firm B’s beta of 1.375. The risk-free rate of interest equals 4%, and the expectedreturn on the market portfolio equals 12%. RequiredA. Calculate the WACC for each firm assuming there are no taxes.B. Recalculate the WACC figures assuming that the two firms face a marginaltax rate of 34%. What do you conclude about the impact of taxes from yourWACC calculations? C. Explain the simplifying assumptions managers make when using WACC asa project discounting method and discuss some of the common pitfallswhen using WACC in capital budgeting.