User Account

All Pages

Calculate the new value of the business

Assignment Help Accounting Basics
Reference no: EM132757317

Question: The Chief Financial Officer (CFO) of the Q13.92T Company is interested to identify the cost of capital and value of the company. Currently, the Q13.92T is an all-equity company. Earnings before interest and taxes (EBIT) for the company is expected to be $75,166 forever, and the cost of capital is currently 13.92 percent. The corporate tax rate applicable to this company is 34.1 percent.

You need to show necessary workings.

A. Calculate the market value of Q13.92T.

B. Suppose Q13.92T floats a $34,387 debt issue and uses the proceeds to reduce share capital. The interest rate is 9.26 percent. Calculate the new value of the business.

C. Calculate the new value of equity.

D. Calculate the cost of equity of Q13.92T after the debt issue.

E. Calculate the weighted average cost of capital.

F. What are the implications for capital structure?

Reference no: EM132757317

Questions Cloud

Why does rushkoff think the wealthy fear for their own survi : Why does Rushkoff think the wealthy fear for their own survival? What might an event be that causes this fight for survival? What is his advice for them?
What two main areas constitute metaphysics : 1. What two main areas constitute Metaphysics? 2. Name one theory of knowledge and the thesis is defends.
What was the cash balance after payment of liabilities : On December 31, 2016, the accounting records of MM, NN and OO Partnership (a general partnership) included the following ledger account balances.
How much earnings tax apply to total returns for valentina : The assets that produced the capital returns were owned by the fund for a period greater than 12 months. How much earnings tax would apply to the total returns?
Calculate the new value of the business : Suppose Q13.92T floats a $34,387 debt issue and uses the proceeds to reduce share capital. The interest rate is 9.26 percent. Calculate the new value of the.
Find how much earnings tax would apply to total returns : Jody is age 69 and retired from the workforce. She holds part of her superannuation balance. How much earnings tax would apply to the total returns?
How much earnings tax would apply to the total returns : How much earnings tax would apply to the total returns? Anwen is age 61 and retired from the workforce. He has $760000 in retirement phase income stream account
What will be the total amount of contributions tax deducted : What will be the total amount of contributions tax deducted by the super fund? Superannuation Guarantee contributions of $14500
What amount should the inventory be valued : On January 2, 2019, Silent Corporation has an investment property that was carried at fair value with a carrying amount of Php 2,500,000.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd