WACC Example 5. SpillarCare borrows money at 5% interest after taxes and pays 10% for equity. The company raises capital by 35% debt and 65% equity.
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- Use the following information about Red Rocks Inc. to answer the following question: Assume the following: Pays no taxes Return on net operating assets (RNOA) = 18% %3D Has $2,000 in net operating assets financed by equity At the beg. of the year borrows $1000 at 8%. Uses debt to buy additional operating assets. What is the return on equity (ROE) for Red Rocks? Edit View Insert Format Tools Table 12pt v Paragraph v B IU A e T?v I.Coco Kitchen has a WACC of 14%. It has 19% of return on equity, and 60% of debt-to-asset ratio (i.e., weight on debt). Assume tax equals 0, calculate the interest rate on the debt. O 9.90% O 11.14% O 10.67% O 6.50%15. Paws Inc is a new company that is financed with 60% debt and 40% equity. Paws pays 6%interest on its debt and its equity investors expect a 15% return. Assuming no taxes, based on the above what is Paws WACC? a. 8.8%b. 9.2%c. 9.6%d. 10.0%
- Bank Three has equity = $250 million, return on equity (ROE) = 15%, interest expense = $105 million, provision for loans (P) = $30 million, noninterest income = $45 million, noninterest expense = $20 million and a tax rate = : 34%. What is the total interest income required? A. $216.82 million. B. $236.82 million. C. $146.82 million. D. $166.82 million.A company has a $500 000 million loan with a 7% interest rate and a $300,000 loan with an 8% rate. The company’s tax rate is 20%. Find the average interest rate, and its pretax cost of debt. And find the after-tax cost of debt.Company X has debt and equity as source of funds..Company X has market value of debt as $ 150000 and a book value of debt as $ 80000. The company has book value of equity as $ 100000 and market value of equity as $ 125000. The cost of debt is 8.25% and cost of equity is 9.57%. The tax rate is 38%. What is WACC?
- A Corporation is planning to loan P20M at an effective interest rate of 10%. The company pays income tax at a rate of 30%. What is the cost of debt capital? a. P140,000 b. P200,000 c. P540,000 d. P600,000ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 6.6 percent annually. What is the company's pretax cost of debt? If the tax rate is 24 percent, what is the aftertax cost of debt? Pretax cost of debt: __________% Aftertax cost of debt: __________%Currently Forever Flowers Inc, has a capital structure. consisting of 25% debt and 75% equity Forever's D debt currently has 9% yield to maturity. The risk free rate is 3% and the market risk premium is 6%. D Using the CAPM, Forever estimates that its cost of Dequity is currently 11.5% The company has. a 25% tax rate. PL AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA Da) What is Forever's current WACC? Round to two decimal places %% Db). What is the current beta on Forever's common stock? Round to two clecional places () What would Forever's beta be if the company had no debt, in its capital structure? (That is, what is Forever's unlevered beta) your answer to two decimal places. Round ▷ Forever's financial staff is considering changing it capital I went ahead with the proposed change, the yield to maturity Dstmeture to 40% debt and 60% equity. If the comparaturity on the company's bonds would rise to 10%. The proposed change will have no effect on the tax rate company's Ad) What would be the…
- Pogo Stick Co can issue debt yielding 10 percent. The company is paying at a 40 percent tax rate. What is the aftertax cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of debt %Calculate the WACC using the following information: Debt-Equity ratio is 50%. Cost of debt is 8.00% Cost of equity is 10.00% Company pays tax at 35%. a) 7.60% b) 8.40% c) 9.33% d) 9.00%Suppose a company named Arts Pvt. Ltd has taken a loan from a bank for business expansion at a rate of interest of 8%, and the tax rate is 20%. Calculate the cost of debt.