Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ra = 9% as long as it finances at its target capital structure, which ca 50% debt and 50% common equity. Its last dividend (Do) was $3.30, its expected constant growth rate is 6%, and its common stock sells for $27. EEC's tax rate is 40%. Two projects are avail Project A has a rate of return of 13%, and Project B's return is 12%. These two projects are equally risky and about as risky as the firm's existing assets. a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. c. Which projects should Empire accept? -Select

ABC collmpany uses only debt equity. It can borrow unlimited at an interest rate of 10% as long as it finances At its target capital structure, which calls for 50% debt and 50% equity. Its last dividend was $1.46, it's expected constant growth rate is 8% and it's stock still sells for $24. ABC companies tax rate is 21%. Four projects are available project A cost $250 million in return = 13% project B cost 125 milion return = 12% project C cost $200 million and return = 11% project D cost $150 million and return = 10%. 1a) what is ABC Companys cost of common stock? 1b) What is ABC Company's WACC? 1c) What should be the optimal budget?

Baghiben

Hunter Corporation expects an EBIT of $30,000 every year forever. The company currently has no debt and its cost of equity is 14 percent. The tax rate is 20 percent. The company is able to borrow at 8 percent. What will the value of the company be if it takes on debt equal to 60 percent of its levered value? [Note: the proceeds from issuing new debt are used to repurchase Hunter's equity.] O $251,488.1 $194,805.2 O $274,285.8 O $171,428.6

Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 40% debt and 60% common equity. Its last dividend (Do) was $2.60, its expected constant growth rate is 4%, and its common stock sells for $30. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 11%, and Project B's return is 10%. These two projects are equally risky and about as risky as the firm's existing assets. a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. -Select- % c. Which projects should Empire accept?

(b) Iron Corporation currently has no debt on its balance sheet. Iron's marginal tax rate is 30% and the cost of debt is 7%. () If Iron were to issue sufficient debt to reduce its taxes by $100 million per year permanently, how much debt would Iron need to issue? What would be the value of the tax shield? (i) Iron plans to borrow $5 billion on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. Investors pay a tax rate of 35% on their interest income and 15% on their income from capital gains and dividends. Calculate the present value of the interest tax shield from this recapitalization from an investor's perspective.