Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Broward Manufacturing recently reported the following information:Net income $615,000ROA 10%Interest expense $202,950Accounts payable and accruals $950,000Broward’s tax rate is 25%. Broward finances with only debt and common equity, so it has no preferredstock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity.Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital(ROIC).arrow_forwardParaglide Corp. has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent, and its pretax cost of debt is 8.2 percent. If the tax rate is 34 percent, what is the company's WACC? 11.28 percent 11.72 percent 13.20 percent 12.84 percent 12.91 percentarrow_forwardFama's Llamas has a weighted average cost of capital of 9.4 percent. The company's cost of equity is 13 percent, and its pretax cost of debt is 6.7 percent. The tax rate is 22 percent. What is the company's target debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.) L Debt-equity ratioarrow_forward
- A company finances its operations with 57 percent debt and the rest using equity. The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%arrow_forwardCompany X has a cost of equity of 16.31% and a pretax cost of debt of 7.8%. The debt-equity ratio is 0.56 and the tax rate is 21%. What is the unlevered cost of capital? A )14.01% b) 13.85% c) 13.70% D) 14.08% E)14.26%arrow_forwardQuestion: Fama's Llamas has a weighted average cost of capital of 9.5%. The company's cost of equity is 11%, and its cost of debt is 7.5%. The tax rate is 40%. What is the company's debt- equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)arrow_forward
- Gamma Inc. has a weighted average cost of capital of 18.60%. The firm’s cost of equity is 24.40%, and it’s cost of debt is 15%. The tax rate is 34%. What is Gamma’s debt-to-equity ratio?arrow_forwardThe W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 12%. In addition, it has $700,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $4.8 million, its average tax rate is 25%, and its profit margin is 2%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places. TIE: ROIC: X %arrow_forwardA company finances its operations and growth opportunities, using common equity and debt. The debt-to-equity ratio of the CI Corp. is 0.3. If its cost of equity is 14%, and its pretax cost of debt is 5%, what comes closest to the company’s WACC? The tax rate is 21%. 6.7% 4.5% 7.1% 6.3% 5.8% The answer is not 7.1%arrow_forward
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