Global Pistons (GP) has common stock with a market value of $380 million and debt with a value of $245 million Investors expect a 17% return on the stock and a 4% return on the debt. Assume perfect capital markets. a. Suppose GP issues $245 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? b. Suppose instead GP issues $53.63 million of new debt to repurchase stock L. If the risk of the debt does not change, what is the expected return of the stock after this transaction? If the risk of the debt increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part (7 CEED a. Suppose GP issues $245 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? It GP issues $245 milion of new stock to buy back the debt, the expected return is [17%. (Round to two decimal places)

Suppose the risk-free rate is 2.61% and an analyst assumes a market risk premium of 6.65%. Firm A just paid a dividend of $1.19 per share. The analyst estimates the ẞ of Firm A to be 1.31 and estimates the dividend growth rate to be 4.79% forever. Firm A has 288.00 million shares outstanding. Firm B just paid a dividend of $1.89 per share. The analyst estimates the ẞ of Firm B to be 0.87 and believes that dividends will grow at 2.28% forever. Firm B has 196.00 million shares outstanding. What is the value of Firm B? Submit Answer format: Currency: Round to: 2 decimal places. Show Hint

What is cost of equity capital on these financial accounting question?

Mackenzie Company has a price of $34 and will issue a dividend of $2.00 next year. It has a beta of 1.5, the risk-free rate is 5.2%, and the market risk premium is estimated to be 5.2%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)?

Mackenzie Company has a price of $37 and will issue a dividend of $2.00 next year. It has a beta of 1.2, the risk-free rate is 5.4%, and the market risk premium is estimated to be 4.8%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? a. Estimate the equity cost of capital for Mackenzie. The equity cost of capital for Mackenzie is %. (Round to two decimal places.) b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? The expected growth rate for dividends is | %. (Round to two decimal places.)

Hardmon Enterprises is currently an​ all-equity firm with an expected return of 18.3%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. Assume perfect capital markets. a. Suppose Hardmon borrows to the point that its​ debt-equity ratio is 0.50. With this amount of​ debt, the debt cost of capital is 5%. What will be the expected return of equity after this​ transaction? b. Suppose instead Hardmon borrows to the point that its​ debt-equity ratio is 1.50. With this amount of​ debt, Hardmon's debt will be much riskier. As a​ result, the debt cost of capital will be 7%. What will be the expected return of equity in this​ case? c. A senior manager argues that it is in the best interest of the shareholders to choose the capital structure that leads to the highest expected return for the stock. How would you respond to this​ argument?

6. Company cost of capital (S9.2) Nero Violins has the following capital structure: Total Market Value ($ millions) $100 Security Debt Preferred stock Common stock Beta 0 0.20 1.20 40 299 a. What is the firm's asset beta? (Hint: What is the beta of a portfolio of all the firm's securities?) b. Assume that the CAPM is correct. What discount rate should Nero set for investments that expand the scale of its operations without changing its asset beta? Assume a risk-free interest rate of 5% and a market risk premium of 6%. Ignore taxes.

Suppose the risk-free rate is 3.91% and an analyst assumes a market risk premium of 6.52%. Firm A just paid a dividend of $1.11 per share. The analyst estimates the β of Firm A to be 1.20 and estimates the dividend growth rate to be 4.27% forever. Firm A has 264.00 million shares outstanding. Firm B just paid a dividend of $1.83 per share. The analyst estimates the β of Firm B to be 0.70 and believes that dividends will grow at 2.86% forever. Firm B has 197.00 million shares outstanding. What is the value of Firm B? Answer format: Currency: Round to: 2 decimal places.

Mackenzie Company has a price of $32 and will issue a dividend of $2.00 next year. It has a beta of 1.1, the risk-free rate is 5.9%, and the market risk premium is estimated to be 4.8%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? a. Estimate the equity cost of capital for Mackenzie. The equity cost of capital for Mackenzie is %. (Round to two decimal places.)

Suppose the risk-free rate is 2.67% and an analyst assumes a market risk premium of 6.91%. Firm A just paid a dividend of $1.21 per share. The analyst estimates the β of Firm A to be 1.45 and estimates the dividend growth rate to be 4.46% forever. Firm A has 295.00 million shares outstanding. Firm B just paid a dividend of $1.75 per share. The analyst estimates the β of Firm B to be 0.89 and believes that dividends will grow at 2.83% forever. Firm B has 188.00 million shares outstanding. What is the value of Firm A? Answer format: Currency: Round to: 2 decimal places.