(a) An MNC has total assets of $150 million and debt of $50 million. firm's before-tax cost of debt is 10 percent, and its cost of financing with e is 12 percent. The MNC has a corporate tax rate of 32 percent. What is firm's weighted average cost of capital? Slater Co. is a US based MNC that finances all operations with debt and e It borrows U.S. funds at an interest rate of 10 percent per year. The long risk-free rate in the United States is 5 percent. The stock market return United States is expected to 15 percent annually. Slater's beta is 1. target capital structure is 40 percent debt and 60 percent equity. Slater subject to a 30 percent corporate tax rate. Estimate the cost of capit Slater Co.
Q: According to the CAPM, what is the required rate of return for a stock with a beta of 0.7, when the…
A: To calculate the required rate of return we use the below formula Required rate of return = Risk…
Q: If the trade executes, how much money do you receive from the buyer? (Round your answer to 2 decimal…
A: Investment refers to those mechanism which is used by the company for the purpose of generating…
Q: Rashmi has heard about shares and debenture but she is confused in between both terms as you are…
A: Shares represent ownership of the company. The company gets capital but in return provides the…
Q: Explain Target Return on Investment?
A: Investments are done to get the return on the same. Generally, investments are done when an…
Q: You expect to receive $33,000 at graduation in two years. You plan on investing it at 9.75 percent…
A: Time = ln(Future value / Present value) / ln(1 + Rate) Future value = $168,000 Present value =…
Q: If the financial market is frictionless, the cost of equity is higher than the cost of debt in all…
A: A financial market is a place where people may exchange low-cost financial securities and…
Q: You always dream to be a millionaire in your entire life and you have only $5,000 to invest now.…
A: Solution:- We know when an amount is invested, it earns interest. The amount initially deposited is…
Q: You plan to deposit $700 in a bank account now and $900 at the end of one year. If the account earns…
A: The balance in the account right after second deposit will be total amount deposited plus interest…
Q: Explain the following 1. The principle of gearing 2. Why debt is cheaper than equity 3. What the…
A: There are a lot of ways to finance the business. The most commonly used financing options are debt…
Q: Bob buys a property with an 80% LTV interest only mortgage at an annual rate of 6%, with annual…
A: Return on Equity: It is a measure of the profitability of a business in relation to the equity and…
Q: The U.K. based auto manufacturing company with a pro forma statement analysis has estimated the…
A: Hedging is a risk management strategy used to offset investment losses by taking the opposite…
Q: Problem 3. Humble Manufacturing is interested in measuring its overall cost of capital. The firm is…
A: Financing is referred to as the process of providing finance or funds to the business through…
Q: David bought 15 shares of stock at $9.00 per share and sold them for $10.50 per share. What was his…
A: The Financial Ratio is mainly used by the investor for measuring the financial performance of the…
Q: please answer all questions. as soon as possible please :) thank you Clare Jarrett has just…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: For each of the following, compute the future value: (Do not round intermediate calculations and…
A: The FV calculation offers investors to forecast the amount of profit that could be made by various…
Q: Using i of 9%, compare the net present worth of the net expenditures for the two proposed plans and…
A: Here we will use the concept of present value of money to determine the present worth of the…
Q: Assume Gillette Corporation will pay an annual dividend of $0.61 one year from now. Analysts expect…
A: Year Dividend 1 0.61000000000000 2 0.68137000000000 i.e. last dividend * 1.117 3…
Q: You deposit $200 each year in an account for 15 years and then $400 each year in the same account…
A: Calculations are done in excel so there is no intermediate rounding Let i denote effective annual…
Q: Depreciation expense is considered as allowable deduction Select one: True False
A: Depreciation expenditure is the amount depreciated for a specific period (e.g., quarter or year),…
Q: Problem 1. Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales…
A: A cash budget is a budget prepared to know the cash receipts, payments, and ending cash balance for…
Q: Provide evaluation on the viability of Housing project in Puncak Alam to Mudah Berhad. Your…
A: Cost of capital is 9.5%
Q: Find the value of a bond maturing in 11 years, with a $1,000 par value and a coupon interest rate…
A: Semiannual coupon amount (s) = $55 (i.e. $1000 * 0.055) Semiannual required return (r) = 0.075…
Q: Home Place Hotels, Inc., is entering into a 3-year remodeling and expansion project. The…
A: Data given:: D0= $2.20 D1= $2.20 D2 and D3 , 6% growth is expected. D4 ,19% growth is expected D5…
Q: ancial statements for Smolira Golf Corporation follow. SMOLIRA GOLF CORPORATION 2020 and…
A: Corporate valuation is the process of assessing the worth of a company entity in the realm of…
Q: Reno Revolvers has an EPS of $2.50, a free cash flow per share of $3.20, and a price/free cash flow…
A: The P/E ratio is used to measure the value of the company and to determine if the company is…
Q: Find the internal rates of return on a cash flow with deposit amounts of Ao = 40, 10, = A₁ = 120, A₂…
A: The internal rate of return method is used to find the profitability of a project by calculating if…
Q: (Preferred stock valuation) Calculate the value of a preferred stock that pays a dividend of…
A: Annual dividend per share (D) = $8.00 Required return (r) = 0.15 Value of a preferred stock (P0) = ?…
Q: Ann wants to buy an office building which costs $2,000,000. She obtains a 30 year, Interest Only…
A: Loans are to be paid by the monthly payment that carry the payment of interest and payment for…
Q: Manuel takes a 5-year loan that has 60 end of the month payments of L under the nominal annual…
A: Calculation are done in excel, so there is no intermediate rounding up. nominal rate compounded…
Q: write a short report on Y Combinator, on its business model and the amount and sources of capital it…
A: A business model is a firm's primary strategy for operating financially. Models often include…
Q: You are interested in a car which costs $25,000. You have a $2000 down payment, and you have a found…
A: A loan is amortized by paying equal monthly installments comprising Principal and interest. Total…
Q: Kendra Corporation's preferred shares are trading for $27 in the market and pay a $4.10 annual…
A: Preferred stock, often known as preferred stock, is a type of stock that pays dividends to…
Q: give your own perspective on why financial literacy is important
A: The knowledge and use of diverse financial abilities is referred to as financial literacy.…
Q: Jabari is planning for his retirement in 5 years’ time. He plans to deposit $200,000 immediately…
A: In this question, we have to calculate the future value of given annuity. Future value of annuity is…
Q: Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year partially…
A: Building Cost $ 10,00,000.00 LTV 100% Interest Rate 7% Time Period 30 Balloon Payment…
Q: Calculate the total deferred payment price.
A: Total Deferred Payment Price: It refers to the total amount paid on the loan borrowed by the…
Q: BroadStreet Bank has just been given a $10,000,000, 5 year CD deposit by the local municipality.…
A: Bonds are considered a safe source of investment as it carries less risk and is at that part of the…
Q: Please correct the aswer
A: The current yield of the bond is referred to as the relationship between the annual coupon amount…
Q: A 15-year bond with 7.5% coupons paid semiannually will be redeemed at P1400. The bond is bought to…
A: Semiannual coupon rate = 0.0375 (i.e. 0.075 / 2) Semiannual yield (y) = 0.03 (i.e. 0.06 / 2)…
Q: Five years ago, $12, 000 was deposited into a savings account that provides an interest of 6.5%…
A: A savings account is a deposit account opened with banks and other financial institutions. The…
Q: What is a firm's weighted-average cost of capital if the stock has a beta of 2.45, Treasury bills…
A: The weighted average cost of capital is calculated to determine the average cost of raising funds…
Q: Emerald City Corporation (ECC) is expanding rapidly and currently needs to retain all of its…
A: The dividend discount model is used to find out the current price of the stock as it is considered…
Q: A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and…
A: We will use the concept of time value of money here. As per the concept of time value of money the…
Q: Hello! I have a financial problem that I am having issues finding the compounding formula for. The…
A: Compounding refers to the practice of providing interest in which interest is periodically added to…
Q: Oil Gas Limited is considering investing in two projects; Project 1 and Project 2. Information…
A: The question is related Capital Budgeting The Net Present Value is calculated with the help of…
Q: Why is diversification considered “good” by most professionals? Can you think of a situation where…
A: Investment means engaging your funds to generate income for the future. Risk and return are two…
Q: 5. What principal (present value) invested for 3 years at 10% compoun total future value of P4,000?…
A: The present value is the equivalent value today of the future cash flow considering the interest and…
Q: Please draw the Capital Market Line and the Security Market Line. Please write down their function…
A: CAPITAL MARKET LINE V/S SECURITY MARKET LINE…
Q: aria has extra money, and she is planning to buy certain income-earning assets to help her earn…
A: There are many method of investing the money in the market depending on the need and objective of…
Q: What is the outstanding balance in the 5th period? Period Regular Payment Interest Repayment of the…
A: Outstanding balance of 5th period: = Opening Balance of 5th period + Interest - Repayment
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Hanson Mills, a U.S.-based MNC has a foreign subsidiary that earns $1,050,000 before local taxes, with all the after tax funds available to the parent in the form of dividends. The foreign income tax rate is 30 percent, the foreign dividend withholding tax rate is 15 percent, and the firm's U.S. tax rate is 35 percent. What are the funds available to the parent MNC if foreign taxes can be applied as a credit against the MNC's U.S. tax liability? A) $624,750 B) $425,250 C) $257,250 D) $735,0003. Hanson Mills,, a U.S.-based MNC has a foreign subsidiary that earns $1,050,000 before local taxes, with all the after tax funds to be available to the parent in the form of dividends. The foreign income tax rate is 30%, the foreign dividend withholding tax rate is 15% and the firm's U.S. tax rate is 35%. What are the funds available to the parent MNC if no tax credits are allowed? A) $624,752 B) $425,250 C) $406,088 D) $735,000a) An Australian company has total assets of $150 million and debt of $30 million. The firm's before-tax cost of debt is 5% and its cost of equity is 12%. If the corporate tax rate is 30%, calculate the firm's cost of capital and the appropriateness of its use as a discount rate in capital budgeting.
- a) An Australian company has total assets of $150 million and debt of $30 million. The firm's before-tax cost of debt is 5% and its cost of equity is 12%. If the corporate tax rate is 30%, calculate the firm's cost of capital and the appropriateness of its use as a discount rate in capital budgeting. (b) Assume AUD = 0.58 GBP and inflation is 3.5% pa in Australia and 7% pa in Great Britain. Estimate the AUD/GBP spot rate in one year's time and comment on the accuracy of this estimate.Sunrise Manufacturing, Inc. Sunrise Manufacturing, Ic., a U.S. multinational company, has the following debt components in its consolidated capital section, E. Sunrise's shareholders' equity is $40,000,000 and its finance staff estimates their cost of equity to be 20.0%. Current exchange rates are also listed in the table. Income taxes are 40% around the world after allowing for credits. Calculate Sunrise's weighted average cost of capital. Are any assumptions implicit in your calculation? What is Sunrise's weighted average cost of capital? % (Round to two decimal places.) - X Data table Assumption Value Tax rate 40% $10,000,000 25-year US$ bonds 5-year US$ bonds 10-year eurobonds (euros) $6,000,000 €9,000,000 20-year yen bonds (yen) Pre-tax cost of 25-year US$ bonds Pre-tax cost of 5-year US$ bonds Pre-tax cost of 10-year eurobonds Pre-tax cost of 20-year yen bonds Spot rate ($/€) Spot rate ($/£) Spot rate (¥/$) ¥800,000,000 7.5% 4.5% 6.0% 4.0% 1.2700 1.9200 107.00 Click on the icon…Suppose a parent company wishes to determine the expected after-tax dollar cost of Rs.600 million local debt (at 16 per cent) raised by its subsidiary company S. Assuming a tax rate of 40 per cent, anticipated average annual devaluation of 3 per cent of the Indian rupee in relation to the US dollar and tax deduction of foreign, exchange losses, compute the cost of the debt.
- To understand the advantage of debt capital from a tax perspective in the United States, determine the before-tax and approximated after-tax weighted average costs of capital if a project is funded 25%-75% (D-E mix) with debt capital borrowed at 14% per year. A recent study indicates that corporate equity funds earn 22% per year and that the effective tax rate is 37% for the year. The tax advantage reduces the WACC from % to % per year.You are the corporate treasurer of Martial International Inc. Your firm rated as AAA, is able to raise capital in US dollars at floating rate of LIBOR+0.5% or Canadian dollars at 5.5% flat. However, Mo International ltd, with a rating of A, is only able to raise the capital in US dollar at floating rate of LIBOR +0.75% or in Canadian Dollars at a fixed rate of 6.75%.Assume that Martial International Inc wants to borrow US dollars at a floating rate of interest and Mo International ltd wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 30-basispoint spread. Construct a swap that is equally attractive to Martial International Incand Mo International Inc. and show the rates of interest they will end up paying.A Canadian bank has operations in USA. 65% of their net cash flow is from Canadian operations and 35% is from the US. What are the 3 elements to be used to determine the value of this bank? With the Canadian dollar appreciating relative to the US dollar how will the valuation of this bank be affected?
- Sainsbury is financed by both debt and equity. Using the following information and calculate the weighted average cost of capital (WACC) of Sainsbury. (HINT)the average of recent yearly returns of FTSE100 as proxy of UK market is 7.5%; UK corporate tax rate is 19%). Debt 748,000 Equity 6,604,000 Risk free rate 1.971% Beta 0.27 Current Debt 258,000 Total liabilities and stockholders' equity 25,162,000Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt?National Co.’s capital structure consists entirely of long-term liabilities and common equity. The cost of capital for long-term liabilities is 3% while for common equity is 5%. The tax rate applicable is 30%. The weighted average cost of capital of National Co. is 4.13%. What proportion of the company’s capital structure is funded by long-term liabilities? (Format: XX.XX%)