The beta of Kimberly-Clark firm is now 0.91 and the Debt-to-Equity ratio is 12%. Assume that Kimberly-Clark is planning to increase its Debt-to-Equity ratio to 30%. Given that the corporate tax rate is 40%, its new beta will be: A. 1.00 B. 0.86 C. 0.95 D. 1.2 E. None of the above
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- XYZ is considering altering its capital structure. Currently it has 40% debt and 60% equity. XYZ's levered beta is 2.0 under its current capital structure. The firm's tax rate is 40% which will not change if the capital structure is altered. What is the value of the levered beta if XYZ changes its capital structure to 50% debt, 50% equity? show your answer to 1 decimal place (example: a beta of 1.2)The beta of Kimberly – Clark firm is now 0.91 and the Debt to Equity ratio is 12%. Assume that Kimberly – Clark is planning to increase its Debt to Equity ratio to 30%. Given that the corporate tax rate is 40%, its new beta will be: 00 86 95 2 None of the aboveAn all equity firm announces that it is going to borrow $11 million in debt and then keep that debt at a constant value relative to the overall value of the company. What would be the appropriate discount rate for the expected interest tax shields generated by this additional debt? A. Required return on debt B. Required return on equity C. Required return on Assets D. WACC
- which one is correct please confirm? QUESTION 5 Heleveton Industries is 100% equity financed. Its current beta is 1.1. The expected market risk premium is 8.5%, and the risk-free rate is 4.2%. If Heleveton changes its capital structure to 25% debt, it estimates its beta will increase to 1.2. If the after-tax cost of debt will be 6%, should Heleveton make the capital structure change? a. Yes, cost of capital decreases 1.67% b. No, cost of capital increases by 0.85% c. Yes, cost of capital decreases by 2.52% d. No, stock price would decrease due to increased riskH5. A cmpany's tax rate is 40%, its beta is 1.20, and it uses no debt. However, the CFO is considering moving to a capital structure with 25% debt and 75% equity. If the risk-free rate is 5.0% and the market risk premium is 6.0%, by how much would the capital structure shift change the firm's cost of equity? Show proper calculationCalculate the company's asset beta, if the firm's equity beta is 1.6, the debt equity ratio is 0.6 and the marginal tax rate is 30%. Select a O O 1.1268 2.1268 O 1.2618 2.216
- An all equity financed company currently has a beta of 1.2 and a marginal tax rate of 20%. The expected return on the market is 8%. The risk-free rate of return is 3%. The company's before-tax cost of debt is 5%. The company decides to alter its capital structure and will target 50% debt, which will remain constant. What is this company's new weighted average cost of capital (WACC)? a) 6.5% b) 7.7% c) 8.9% d) 10.2%Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $195,000 per year. The cost of equity is 13.9 percent and the tax rate is 21 percent. The firm can borrow perpetual debt at 5.9 percent. Currently, the firm is considering converting to a debt–equity ratio of 1.05. What is the firm's levered value? MM assumptions hold. Multiple Choice $841,727 $1,092,192 $757,554 $927,952 $1,227,4809. Determining the optimal capital structure Aa Aa Understanding the optimal capital structure Review this situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio rd rs WACC 30% 70% 7.00% 10.50% 8.61% 40% 60% 7.20% 10.80% 8.21% 50% 50% 7.70% 11.40% 8.01% 60% 40% 8.90% 12.20% 8.08% 70% 30% 10.30% 13.50% 8.38% Which capital structure shown in the preceding table is Universal Exports Inc.'s optimal capital structure? Debt ratio = 40%; equity ratio = 60% Debt ratio 50%; equity ratio = 50% Debt ratio = 70%; equity ratio 30% Debt ratio = 30%; equity ratio = 70% Debt ratio = 60%; equity ratio = 40% Consider this case: Globo-Chem Co. is an all-equity firm, and it has a beta of 1. It is considering changing its capital structure to 65% equity and 35% debt. The firm's cost of debt will be 8%, and it will face a tax rate of 40%.
- Your firm has a target debt ratio of 30%. Cost of debt (Rb) is 6%. The risk-free rate is 3% and the expected market risk premium is 6%. Your firm's unlevered (asset) beta is 1. What is the appropriate rate to discount the interest tax shields associated with your debt? Only typed answerMarcus Inc., a manufacturing firm with no debt outstanding and a market value of $100 million is considering borrowing $ 40 million and buying back stock. Assuming that the interest rate on the debt is 9% and that the firm faces a tax rate of 21%, answer the following question: Estimate the present value of all future interest tax savings, assuming that the debt change is permanent. Group of answer choices a. 21m b. 8.4m c. 0.756m d. 1.89mRelever Inc. has a debt-to-equity (D/E) ratio of 0.3 ; its target D//E is 1.5 . Relever currently has an estimated beta of 1.7. Relever's estimated tax rate is 30 percent. What is the estimate of Relever's beta at its target D/E? Relever's beta at its target (D//E)^(**) of 1.5 is estimated to be (
