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Q: What is the debt ratio for a firm with an equity multiplier of 3.5? Multiple Cholce 71.43 percent…
A: Equity multiplier = 3.5 Equity to capital = 1/Equity multiplier = 1/3.5…
| a. |
0.25
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| b. |
4.00
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| c. |
0.75
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| d. |
1.00
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- A firm has a debt-to-equity ratio of 2. What is its equity multiplier? 01 O 2.5 03 O 1.5 O 2A firm has a debt-equity ratio of 1.10. What is the total Debt ratio? A) 0.52 B) 1.10Calculate the cost of equity with the CAPM Calculate the cost od debt based on what the company is currently paying for its debt - Beta of the industry = 1.16 - Equity Risk Premium = 6.97% - Risk-free rate = 3.77% - Objective capital structure of the industry = 13.24%
- What is XYZ's estimated cost of common equity using the CAPM approach? Beta 1.2 rRF 7% RPm 6% Estimated cost of Common Equity ?Which one of the following statements is correct? Multiple Choice If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0. Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5. The debt-equity ratio can be computed as 1 plus the equity multiplier. An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity. An increase in the depreciation expense will not affect the cash coverage ratio. 1You have the following information on a company on which to base your calculations and discussion: Cost of equity capital (rE) = 18.55% Cost of debt (rD) = 7.85% Expected market premium (rM –rF) = 8.35% Risk-free rate (rF) = 5.95% Inflation = 0% Corporate tax rate (TC) = 35% Current long-term and target debt-equity ratio (D:E) = 2:5 a. What are the equity beta (bE) and debt beta (bD) of the firm described above?[Hint: Assume that the above costs of capital have been generated by an appropriate equilibrium model.] b. What is the weighted-average cost of capital (WACC) for this firm at the current debt-equity ratio? c. What would the company’s cost of equity capital become if you unlevered the capital structure (i.e. reduced gearing until there is no debt)
- Suppose TRF = 5%, M = 12%, and b; = 0.75, what is the cost of equity? 5.00% 10.25% 12.00% 6.00%Q#2:Debt to Assets Ratio Debt to Equity Before-tax cost of debt0.0 0 6%0.1 0.11 7%0.2 0.25 9%0.3 0.43 12.5%0.4 0.66 15.5%Krf= 3%, Market Risk Premuim = 5%, T=30%, BUL = 0.9.Required: Determine, its capital structure. Q#3: A firm has 20 million shares outstanding, with a $30 per share market price. The firm has $10million in extra cash that it plans to use in a stock repurchase;…la bonitob at bloky enig (7.8) The interest rate investors expect on a new bond issue can be determined by computing the for the company's Alternatively, it is possible on newly to determine the cost of new debt financing by finding the issued bond with similar (7.9) The firm's overall measure of the cost of capital is the cost of debt is the The dollar cost of equity is overall firm average cost of capital is the cost of equity plus the cost of debt, divided by The dollar (7.10) Interest (is / is not) a tax-deductible expense, and dividends paid to stockholders (are / are not). The payment of interest reduces the firm's taxes by after-tax cost of debt in dollars equals The after-tax cost of debt in percentage terms is WACC = dito The The
- What is the debt ratio for a firm with an equity multiplier of 3.5? ____ 44.09 percent ____ 58.51 percent ____ 66.25 percent ____ 71.43 percentA firm's equity beta is 1.1. Its tax rate is 30 per cent and debt-equity ratio is 4:5. What is the asset beta O a. 0.91 O b. 0.71 O c. 0.81 O d. 0.61If Net Worth = 14, the Market Value of Assets = 250 with duration of 8.0, the Market Value of Liabilities = 200 with duration of 3.0, the calculation for the duration of equity would equal: Group of answer choices C. 1000 B. 100 A. 10 D. 1400