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P15.1 Levered Beta If IBM had an upper-marginal tax rate of 40%, financed itself with 30% debt (relative to 70% equity), and had an unlevered beta of 1.25. Also suppose that the prevailing risk-free rate is 4% and the return of the market average is 10%. a.) What is IBM's levered beta? b.) What is IBM's unlevered cost of equity? c.) What is IBM's levered cost of equity? d.) How much additional risk premium are investors requiring due to IBM's additional, debt-based risk? e.) Suppose that you were told the realized (levered) beta (from the marketplace) was 1.40, can you find IBM's (hypothetical) unlevered beta and, if so, what is it? f.) How would increases in the following variables impact IBM's equity costs? i.] Unlevered beta ii.] Upper Marginal Tax Rate iii.] Weight of Debt iv.] Wight of Equity
ABC Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable.
A Corporation has a debt ratio of 0.5, total assets turnover of 0.25, and profit margin of 10 percent. The company wants to double ROE by increasing profit margin to 12 percent,
as an organizational leader investing your companys cash would you choose stocks bonds or derivatives for investment
Suppose you believe that the Non-stick Gum Factory will pay a dividend of $2 on its common stock next year. Thereafter, you expect dividends to grow at a rate of 6% a year in perpetuity.
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What are some of the advantages of the reciprocal method of cost allocation compared to others?
Find the controls and weaknesses in the controls, Misappropriation of funds, Audit procedures and to test the control system.
Present values are negatively impacted by higher interest rates. How does compounding compare with discounting? How does the future value of an annuity compare with the future value of a lump sum?
Billy purchased a stock for $45 one year ago. The stock is now worth $65. During the year, the stock paid a dividend of $2.50. What is the total return to Billy from owning the stock?
staal corporation will pay a 2.54 per share dividend next year. the company pledges to increase its dividend by 3.5
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