HAMADA EQUATION Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt and 75% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, rRF, is 5%; the market risk premium, RPM, is 6%; and the firm’s tax rate is 40%. Currently, Cyclone’s cost of equity is 14%, which is determined by the CAPM. What would be Cyclone’s estimated cost of equity if it changed its capital structure to 50% debt and 50% equity?

Costly Corporation is considering using equity financing. Currently, the firm's stock is selling for $31.00 per share. The firm's dividend (D0) is $3.00 with constant annual growth rate of 5.0%. If the firm issues new stock, the flotation costs would equal 10.0 percent of the stock's market value. The firm's marginal tax rate is 40%. What is the firm's cost of external equity?

FFC is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt and 75% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, rRF, is 4%; the market risk premium, RPM, is 5%; and the firm’s tax rate is 40%. Currently, FFC has beta of 1.5. What would be FFC’s estimated cost of equity if it changed its capital structure to 40% debt and 60% equity? Should the company opt new capital structure, decide based on the cost of equity computations?

Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $183,000 per year. The cost of equity is 13.1 percent and the tax rate is 21 percent. The firm can borrow perpetual debt at 6.3 percent. Currently, the firm is considering converting to a debt–equity ratio of .93. What is the firm's levered value? MM assumptions hold.   A. $829,786   B. $1,215,262   C. $1,155,579   D. $997,511   E. $921,985

Globex Corp. is an all-equity firm, and it has a beta of 1. It is considering changing its capital structure to 60% equity and 40% debt. The firm's cost of debt will be 6%, and it will face a tax rate of 25%. What will Globex Corp.'s beta be if it decides to make this change in its capital structure? Now consider the case of another company: US Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its curre is 25%. It currently has a levered beta of 1.15. The risk-free rate is 3.5%, and the risk 1.65 1.58 1.80 1.50 e-tax cost of debt is 6%, and its tax rate m on the market is 7.5%. US Robotics

Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 30% debt and 70% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, FRF, is 5%; the market risk premium, RPM, is 5% ; and the firm's tax rate is 25%. Currently, SSC's cost of equity is 15%, which is determined by the CAPM. What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Do not round intermediate Round your answer to two decimal places. calculations. % 4

Your company is financed 20% with riskless debt with a yield of 6% and 80% with equity with a cost of 14%. The corporate tax rate is 30%. a. What is the company's WACC at its existing capital structure? b. What would be the new WACC if it changes to being 40% debt financed?

Corcovado Pharmaceuticals. Corcovado Pharma­­ceutical’s cost of debt is 7%. The risk-free rate of interest is 3%. The expected return on the market portfolio is 8%. After effective taxes, Corcovado’s effective tax rate is 25%. Its optimal capital structure is 60% debt and 40% equity. If Corcovado’s beta is estimated at 1.1, what is its weighted average cost of capital? If Corcovado’s beta is estimated at 0.8, significantly lower because of the continuing profit prospects in the global pharma sector, what is its weighted average cost of capital?

Suppose Alcatel-Lucent has an equity cost of capital of 9.1%, market capitalization of $10.36 billion, and an enterprise value of $14 billion. Assume Alcatel-Lucent's debt cost of capital is 5.5%, its marginal tax rate is 34%, the WACC is 7.68%, and it maintains a constant debt-equity ratio. The firm has a project with average risk. Expected free cash flow, debt capacity, and interest payments are shown in the table: a. What is the free cash flow to equity for this project? b. What is its NPV computed using the FTE method? How does it compare with the NPV based on the WACC method? a. What is the free cash flow to equity for this project? The free cash flow to equity for this project is: (Round all answers to two decimal places. Use a minus sign to indicate a negative number.) Year 1 2 FCFE ($ million) 0 3 Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 FCF ($ million) D=dxV² 45 39.60 Interest 2.62 0 - 100 47.64 0.00 Print Done 2 99…