The Black Bird Company plans an expansion. The expansion is to be financed by selling $21 million in new debt and $57 million in new common stock. The before-tax required rate of return on debt is 9.77% percent and the required rate of return on equity is 13.11% percent. If the company is in the 34 percent tax bracket, what is the weighted average cost of capital?

(Capital structure analysis) The Karson Transport Company currently has net operating income of $495,000 and pays interest expense of $196,000. The company plans to borrow $1.07 million on which the firm will pay 9 percent interest. The borrowed money will be used to finance an investment that is expected to increase the firm's net operating income by $395,000 a year. a. What is Karson's times interest earned ratio before the loan is taken out and the investment is made? b. What effect will the loan and the investment have on the firm's times interest earned ratio? a. What is Karson's times interest earned ratio before the loan is taken out and the investment is made? The times interest earned ratio is times. (Round to two decimal places.) G

Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $4 million of retained earnings with a cost of rs 5 11%. New common stock in an amount up to $8 million would have a cost of re 5 12.5%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd 5 9% and an additional $5 million of debt at rd 5 13%. The CFO estimates that a proposed expansion would require an investment of $8.2 million. What is the WACC for the last dollar raised to complete the expansion?

ABC Co.’s target capital structure is 55% equity and 45% debt. The company has sufficient retained earnings to fund the equity portion of its capital budget.  The before-tax cost of debt is 9%, and the company is subject to 30% income tax.  The expected dividend next period is P5 and the current stock price is P45. What should be the firm’s growth rate in order to attain a weighted average cost of capital of 11.5%?a. 2.68%b. 3.44%c. 4.64%d. 6.75%e. answer not given

Meyer & Co. expects its EBIT to be $47,130 every year forever. The firm can borrow at 9 percent. Meyer currently has no debt, and the cost of assets is 12 percent, and the tax rate is 20 percent. The company borrows $180,000 and uses the proceeds to repurchase shares.   What is the weighted average cost of capital?

Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 10%. New common stock in an amount up to $7 million would have a cost of re = 11.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 11% and an additional $3 million of debt at rd = 15%. The CFO estimates that a proposed expansion would require an investment of $10.5 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

The managers of an all-equity firm are interested in borrowing $1.2 million and using the proceeds to repurchase shares of stock. The firm's investment banker estimates that an appropriate interest rate on the debt is 5%. The firm's current cost of equity is 13% and its tax rate is 21%. Also, the company is expected to generate EBIT of $700,000 in perpetuity. If the managers pursue the capital restructuring plan, then what will be the value of the levered equity? $3,305,846.15 O $4,253,846.15 O $4,436,615.38 O $4,505.846.15 O $3,053,846.15

Gaucho Services starts life with all-equity financing and a cost of equity of 15%. Suppose it refinances to the following market-value capital structure: Debt (D) 46% at rD = 9.6% Equity (E) 54% Use MM’s proposition 2 to calculate the new cost of equity. Gaucho pays taxes at a marginal rate of Tc = 35%. Calculate Gaucho’s after-tax weighted-average cost of capital.

An unlevered firm has a value of $850 million. An otherwise identical but levered firm has $80 million in debt at a 3% interest rate, which is its pre-tax cost of debt. Its unlevered cost of equity is 10%. After Year 1, free cash flows and tax savings are expected to grow at a constant rate of 4%. Assuming the corporate tax rate is 25%, use the compressed adjusted present value model to determine the value of the levered firm. (Hint: The interest expense at Year 1 is based on the current level of debt.) Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answer to two decimal places.

Wentworth Industries is 100 percent equity financed. Its current beta is 1.1. The expected market rate of return is 16 percent and the risk-free rate is 11 percent. Round your answers to two decimal places. Calculate Wentworth’s cost of equity.   % If Wentworth changes its capital structure to 20 percent debt, it estimates that its beta will increase to 1.3. The after-tax cost of debt will be 10 percent. Should Wentworth make the capital structure change? Based on the weighted cost of capital of   %, the capital structure  changed.