A comparable firm (i.e., same industry and similar operations as our firm) has an equity beta of 1.0 and a debt-to-value ratio of 0.3. The debt of the comparable firm is risk-free. Our firm has a debt-to-value ratio of 0.5.   Assuming both firms should have the same asset beta, and that our debt is also risk-free, what is a good estimate of our equity beta? Give your answer to the closest 0.1.

In the context of the adjusted present value (APV) model of firm valuation, one major assumption is that firms will have a fixed debt to equity ratio in the future.

Please answer the question on attached file

How would each of the following scenarios affect a firm’s cost of debt, kd(1 – T); its cost of equity ke and its WACC?  Indicate with a plus sign (+), a minus (-) or a zero if the factor would raise, would lower or would have indeterminate effect on the item in question.  Assume for each answer that other things are held constant even though in some instances this would probably not be true.  Be prepared to justify your answer but recognize that several of the parts have no single correct answer.

Why is that the answer ? Full workings and explanation would be amazing because I don't know how to do this at all. Thank you !

Which of the following statements is most correct? Group of answer choices The optimal capital structure maximizes the WACC. None of these. Increasing the amount of debt in a firm's capital structure is likely to increase the cost of both debt and equity financing. If the after-tax cost of equity financing exceeds the after-tax cost of debt financing, firms are always able to reduce their WACC by increasing the amount of debt in their capital structure.

SPA Group’s latest quick ratio amounted to 0.85. Its fiercest competitor’s latest quick ratio amounted to 0.95. Which has the lower liquidity risk ? Select the correct answer:

Which statement is most correct? *     A. Since debt financing raises the firm’s financial risk, increasing debt ratio will increase WACC.   B. Since debt financing is cheaper than equity financing, increasing debt ratio will reduce WACC.   C. Increasing a firm’s debt ratio will typically reduce the marginal costs of both debt and equity financing; however, it still may raise the firm’s WACC.   D. Statements a and c are correct.   E. None of the above

Which statement below is incorrect? Select one: A. Compared to interview, survey is more suitable to ask standardised questions. B. If a firm has more intangible assets, according to the trade-off theory, it is more likely to have a higher leverage. C. If a firm is more profitable, according to the pecking order theory, it should use less debt for financing. D. The CAPM model implies that a stock with a higher beta has a higher return on average.

Which of the following statements is correct? With all else held constant, a firm will have a higher P/E if its market capitalization rate is higher.       P/E will tend to be higher when ROE is higher (assuming plowback is positive).   P/E will tend to be higher when the plowback rate is higher.