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.
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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
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(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.
- A firm has a total market value of $10 million while its debt has a market value of $4 million. What is the after-tax weighted average cost of capital if the before-tax cost of debt is 10% the cost of equity is 15%, and the tax rate is 21%? Multiple Choice A) 10.4% B) 8.8% C) 12.2% D) 13.0%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.(a) An MNC has total assets of $150 million and debt of $50 million. The firm's before-tax cost of debt is 10 percent, and its cost of financing with equity is 12 percent. The MNC has a corporate tax rate of 32 percent. What is this firm's weighted average cost of capital? (b) Slater Co. is a US based MNC that finances all operations with debt and equity. It borrows U.S. funds at an interest rate of 10 percent per year. The long-term risk-free rate in the United States is 5 percent. The stock market return in the United States is expected to 15 percent annually. Slater's beta is 1.5. Its target capital structure is 40 percent debt and 60 percent equity. Slater Co.is subject to a 30 percent corporate tax rate. Estimate the cost of capital to Slater Co.
- To understand the advantage of debt capital from a tax perspective in the United States, determine the beforetax and approximated after-tax weighted average costs of capital if a project is funded 40%–60% with debt capital borrowed at 9% per year. A recent study indicates that corporate equity funds earn 12% per year and that the effective tax rate is 35% for the year.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 35%–65% (D-E mix) with debt capital borrowed at 11% per year. A recent study indicates that corporate equity funds earn 18% per year and that the effective tax rate is 35% for the year. The tax advantage reduces the WACC from % to % per yearIf Bulldogs Inc. pays taxes at the rate of 40%, what is the firm’s weighted average cost of capital? (In percentage, type the percentage sign on your answer)
- A firm has two components in its capital structure, debt and equity. The after-tax cost of debt is 3% and the cost of equity is 11%. The proportion of equity in the capital structure is 75%. What is the firm's Weighted Average Cost of Capital? Select one: a. 9.47% b. 8.78% c. 9.00% d. 8.37%A company is financed through a loan with a bank at a cost of 10% effective annual rate, before taxes, and with resources contributed by the partners who demand a return of 20% effective annual rate. Knowing that the tax rate is 35%, and the debt to equity ratio [D/E] is equal to 1, the WACC (effective annual rate) is:Company X has debt and equity as sources of funds. Company X has market value of debtas $150,000 and book value of debt as $80,000. The company has book value of equity as$100,000 and market value of equity as $125,000. The cost of debt is 8.25% and cost ofequity is 9.57%. the tax rate is 38%. What is the Weighted Average Cost of Capital(WACC)?a. 7.59%b. 7.78%c. 7.14%d. 7.68%
- Determine the weighted cost of capital for the Mills Company that will finance its optimal capital budget with Php120 million of long-term debt (kd = 12.5%) and Php180 million in retained earnings (ke = 16.0%). Mills’ present capital structure is considered optimal. The company's marginal tax rate is 40%. a. 14.6% b. 12.6% c. None of these d. 14.3%A company will be financing its operations with a capital budget of P40,000,000 and a debt-to-equity ratio of 1. The interest rate on the company's debt is 10%. The expected return on equity by the shareholders is 16.66% while the budgeted net income by management is P6,000,000. Assuming that the company's tax rate is 40%, compute the weighted average cost of capital.Bulldogs Inc., which is funded by debt and ordinary equity, has a debt to equity ratio of 100%. The weighted average cost of capital of the firm is 20%. Using the capital asset pricing model, the cost of equity is determined to be 30%. If the before-tax cost of debt is 16%, what is the applicable tax rate of Bulldogs Inc.? a. 37.50% b. 35.70% c. 25.55% d. 25.80%