Business, 26.12.2019 23:31 kfhayworth4480

Leverage and the cost of capital spam corp. is financed entirely by common stock and has a beta of 1.0. the firm is expected to generate a level, perpetual stream of earnings and dividends. the stock has a price–earnings ratio of 8 and a cost of equity of 12.5%. the company’s stock is selling for $50. now the firm decides to repurchase half of its shares and substitute an equal value of debt. the debt is risk-free, with a 5% interest rate. the company is exempt from corporate income taxes. assuming mm are correct, calculate the following items after the refinancing: a. cost of equity
b. overall cost of capital (wacc)
c. price-earnings ratio
d. stock price
e. stock's beta

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 16:20

Kinkead inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be −$10 million, but its fcf at t = 2 will be $20 million. after year 2, fcf is expected to grow at a constant rate of 4% forever. if the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?

Answers: 2

Answer

Business, 22.06.2019 15:40

Colter steel has $5,550,000 in assets. temporary current assets $ 3,100,000 permanent current assets 1,605,000 fixed assets 845,000 total assets $ 5,550,000 assume the term structure of interest rates becomes inverted, with short-term rates going to 10 percent and long-term rates 2 percentage points lower than short-term rates. earnings before interest and taxes are $1,170,000. the tax rate is 40 percent earnings after taxes = ?

Answers: 1

Answer

Business, 22.06.2019 19:00

Consider the following information on stocks a, b, c and their returns (in decimals) in each state: state prob. of state a b c boom 20% 0.27 0.22 0.16 good 45% 0.16 0.09 0.07 poor 25% 0.03 0 0.03 bust 10% -0.08 -0.04 -0.02 if your portfolio is invested 25% in a, 40% in b, and 35% in c, what is the standard deviation of the portfolio in percent? answer to two decimals, carry intermediate calcs. to at least four decimals.

Answers: 2

Answer

Business, 22.06.2019 21:10

In transportation model analysis, the stepping-stone method is used to: a. obtain an initial feasible solutionb. evaluate empty cells for possible degeneracyc. evaluate empty cells for potential solution improvementsd. identify a dummy origin pointe. balance supply and demand

Answers: 1

Answer

You know the right answer?

Leverage and the cost of capital spam corp. is financed entirely by common stock and has a beta of 1...

Questions