L.A. Clothing has expected earnings before interest and taxes of $1,900, an unlevered cost of capital of 13 percent and a tax rate of 34 percent. The company also has $2,600 of debt that carries a 6 percent coupon. The debt is selling at par value. What is the value of this firm? Multiple Choice O $13,689.20 O $11,583.17 $9,477.14 O $12,636.18 O $10,530.15

L.A. Clothing has expected earnings before interest and taxes of $1,900, an unlevered cost of capital of 13 percent and a tax rate of 34 percent. The company also has $2,600 of debt that carries a 6 percent coupon. The debt is selling at par value. What is the value of this firm? Multiple Choice O $13,689.20 O $11,583.17 $9,477.14 O $12,636.18 O $10,530.15

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Corporate Finance Consider a company where the market value of debt and equity are 25% and 75%,respectively of total Enterprise Value. The company’s debt yields 200bps over the risk free interest rate of 5.25%. The company’s tax rate is 21%. The beta of the company’s stock is 1.2. Assuming the equity risk premium is 4.5%, what is the company’s after-tax WACC?
Optimist Company can sell common shares at $30 per share and can obtain debt funding at 8 percent. It has a marginal income tax rate of 25 percent. The yield on US Treasury securities is 3 percent. The market risk premium is 6.0 percent, and the firm's beta is 0.9. It has a targeted debt-to-equity ratio of 1:1. What is its after-tax cost of debt? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count)
Hee Won Couture has an all-equity capital structure with an equity value of $238,600. The expected earnings are $52,400 based on estimated sales of $300,000. The firm pays no taxes and can borrow at 6.7 percent. What is the value of RWACC? Multiple Choice O O O O O 11.70% 17.47% 21.96% 35.11% 15.99%
A company is an all-equity firm that has projected earnings before interest and taxes, $490,000, forever The current cost of equity is 16% and the tax rate is 21%. The company is in the process of issuing $1,000,000 of bonds at par that carry a 6% annual coupon. What is the levered value of the firm? O a. $2,424,125 O b. $2,363,849 O c. $2,142,793 O d. $2,629,375
Pls help correctly, I only need c part and correct with approach and explanation.
Stevensons bakeries and all equity firm that has a projected perpetual EBIT of $144,000 per year. The cost of equity is 10.5% and the tax rate is 21%. Assume there's no depreciation, no capital spending and no change in networking capital. The firm can borrow perpetual debt at 5.8%. Currently, the firm is considering converting to a debt equity ratio of .54. What is the firms levered value? MM assumptions hold.
Compute the WACC of a firm that currently has $1 million in debt and $2 million in equity and $1 million in preferred stock. The current yield to maturity on the firms debt is 2%. Equity holders require a 6% return and preferred stock holders require a 3.8% return. The current tax rate that applies to the firm is 30%. Write your answer as a decimal.
CoffeeCarts has a cost of equity of 15.1%, has an effective cost of debt of 3.8%, and is financed 69% with equity and 31% with debt. What is this firm's WACC? CoffeeCarts's WACC is __ % ? (Round to one decimal place.)
Your firm has a Return on Assets of 8.00 % , the firm can issue debt at 3.50% regardless of the leverage, and the firm's marginal tax rate is 25% . If the firm'sdebt - to - asset ratio is 24 % , what is the Cost of Equity Capital within the 1963 Miller & Modigliani framework? Group of answer choices9.35% 9.78% 6.77% 9.07% 8.81%
Pastel Interiors is currently an all-equity firm that has an annual projected BIT of $136,900. The current cost of equity is 16.5% and the tax rate is 20%. The firm is considering adding $118,000 of debt with a coupon rate of 7.5% to its capital structure. The debt will be sold at par value. What is the value of the unlevered firm (pre-debt)? A $763,570 B $663.758 C $730,133 (D) $696,945 ) $630,570
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?
which option is correct

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