Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing
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Astromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 11.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following:
Required:
a. The beta of the common stock after the refinancing
b. The required return and risk premium on the common stock before the refinancing
c. The required return and risk premium on the common stock after the refinancing
d. The required return on the debt
e. The required return on the company (i.e., stock and debt combined) after the refinancing
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- Astromet is financed entirely by common stock and has a beta of 1.20. The firm pays no taxes. The stock has a price-earnings multiple of 11.0 and is priced to offer a 10.9% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.6%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price?stromet is financed entirely by common stock and has a beta of 1.70. The firm pays no taxes. The stock has a price-earnings multiple of 14.0 and is priced to offer a 10.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.2%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price?Astromet is financed entirely by common stock and has a beta of 1.50. The firm pays no taxes. The stock has a price-earnings multiple of 14.0 and is priced to offer a 10.6% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.2%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price? Complete this question by entering your answers in the tabs below. Req A to E Req F to G2…
- PLEASE HELP WITH D & E Astromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 10.8% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancingAstromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 11.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following: a-c Has been answered. Need the following answered, in Excel if possible. d. The required return on the debt (Enter your answer as a percent rounded to 1 decimal place.)e. The required return on the company (i.e., stock and debt combined) after the refinancing (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) a. Beta of the common stock 2.6selected answer correct b. Required return (before refinancing) 11.4selected answer correct % Risk premium (before refinancing) 6.6selected answer correct % c. Required return (after refinancing) 18.0selected answer correct %…Astromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 11.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following: The following is known: Beta of common stock is 2.6 Required return (before refinancing) is 11.4% Risk Premium (before refinancing) is 6.6% Required return (after refinancing) is 18.0% Risk premium (after refiancing) is 13.2% Required return on the debt is 4.8% Required return on the company (i.e., stock and debt combined is 11.4% The following questions need to be answered (preferrably in Excel) If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price?
- I completed the answers for A-E, but I am unsure how to complete F-G2: Astromet is financed entirely by common stock and has a beta of 1.40. The firm pays no taxes. The stock has a price-earnings multiple of 13.0 and is priced to offer a 10.7% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 5.0%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing COMPLETED ABOVE If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock…beta of 1.0. The firm pays no taxes. The stock has a price-earnings multiple of 10 and is pricedto offer a 10% expected return. The company decides to repurchase half the common stock andsubstitute an equal value of debt. Assume that the debt yields a risk-free 5%. Calculate thefollowing: (LO16-1)a. The beta of the common stock after the refinancingb. The required return and risk premium on the common stock before the refinancingc. The required return and risk premium on the common stock after the refinancingd. The required return on the debte. The required return on the company (i.e., stock and debt combined) after the refinancingIf EBIT remains constant:f. What is the percentage increase in earnings per share after the refinancing?g. What is the new price-earnings multiple? (Hint: Has anything happened to the stock price?)Infosystems, Inc. has a debt/equity ratio = 2. The firm has a cost of equity of 12% and a cost of debt of 6%. Calculate the firm’s equity’s beta (β) after the target debt/equity ratio changes to 1.5. Assume that the cost of debt does not change. Ignore taxes and other market imperfections. The risk-free interest rate is 2% and the market risk premium is 7%.
- Fisher Corp has a beta value of 0.5. If the risk free rate is 2.5% and the Market Risk Premium is 11.0%, what is the Expected/Required return on Fisher Corp's stock? Using the Capital Asset Pricing Model, calculate the expected / required rate of return. (Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15.)Do not use excel, use formulas to compute the question Anheuser-Bush InBev sustains in the last years a fixed level of debt of D=$110B, which is regarded to be risk-free. Moreover, the market value of its shareholders’ equity is E=$70B and the beta of its stock βE=1.4. Suppose that the CAPM holds. The risk-free rate is 2% and the market risk premium is 5%. The company plans to introduce a new ultra-light beer with zero calories, which will be called BudZero. The cost of bringing the beer to the market (at t=0) is $200M. BudZero is then expected to generate constant free cash flows equal to $100M, paid at the end of every year (starting at t=1), forever. Suppose that the “BudZero” project will be financed exclusively with equity. What is the net present value of this project?The Rhaegel Corporation's common stock has a beta of 1.5. If the risk-free rate is 6 percent and the expected return on the market is 10 percent, what is the company's cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity capital