About the cost of capital

Assignment Help Financial Management
Reference no: EM13873365

Cost of capital is

a. the average cost of the firm's assets

b. the hurdle rate set by the board of directors

c. the coupon rate of debt

d. the rate of return that must be earned on additional investment if a firm value is to remain unchanged

Reference no: EM13873365

Questions Cloud

Risk return theory states that the higher the risk : Risk return theory states that the higher the risk, the higher the required return. The present value of $50,000 to be received 10 years from now at 8% interest is about $23,160. The current share price is $25, most recent dividend is $1.25, so divid..
Using constant growth valuation formula : Stock G’s last dividend was $1.60 per share and is expected to grow at a rate of 4%. Using constant growth valuation formula, what is the expected price of the stock if my required return is 12%?
Semi annual coupon bond-what is the coupon rate on bond : A 15-year, semi annual coupon bond is priced at $1,102.75. The bond has a $1,000 face value and a yield to maturity of 5.33 percent, and was issued 3 years ago. What is the coupon rate on the bond?
What is their net income : A Company has 12,000,000 in sales. COGS are 40% of sales. Operating costs are $1,200,000plus depreciation expense of $80,000 and interest expense $80,000. Tax rate is 40%. They have 1,000,000 shares of stock outstanding. What is their net income? If ..
About the cost of capital : Cost of capital is- the average cost of the firm's assets, the hurdle rate set by the board of directors, the coupon rate of debt
Assumming you finance through dealer what will payments be : A new truck costs $34,000 and dealer offers 1.9% APR financing for 48 months (payments made at the end of month) Assumming you finance through dealer what will payments be?
Rate of return to differ from the companys cost of capital : Two factors that cause the investor's required rate of return to differ from the company's cost of capital are_____.
What is the after-tax cost of the firms interest expense : Firm A has EBIT of $400,000, Earnings before Taxes of $280,000, and Earnings after Taxes of $168,000. What is the AFTER-TAX cost of the Firm's interest expense?
Profitability index is greater than the net present value : A project would be acceptable if: A. The net present value is positive. B. The payback is greater than the discounted equivalent annual annuity. c. The equivalent annual annuity is greater than or equal to the firm’s discount rate. d. The profitabili..

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the delivery price of the bond

A 20-year 1000 par value bond pays 4% annual coupons. The bond is priced to yield an annual effective rate of 5%. The continuous compounded risk free rate of interest is 4%. Calculate the delivery price of the bond for a three year forward contract w..

  Introduction of comprehensive credit reporting

Explain the difference between bank credit risk and bank capital risk - What is the difference between lending to individual borrowers via a residential home mortgage compared to other types of consumer lending?

  Calculates its discretionary financing needed

A company calculates its discretionary financing needed and determines this amount of capital cannot be raised at a reasonable cost. Which of the following would reduce the amount of discretionary financing needed?

  Calculate the current price of the bond

Davidson Corp has a $1000 par value bond outstanding paying annual interest of 6.5%. The bond matures in 25 years. If the present yield to maturity for this bond is 10%, calculate the current price of the bond. List i and n in your solution.

  What is the terminal cash flow

Kirksville Company is considering a new assembly line to replace the existing assembly line. The assembly line would require using a parcel of land that cost $800,000 three years ago. What is the initial outlay associated with this project? What is t..

  Present value of her royalty income if opportunity cost

Mary will receive $12,000 per year for the next 10 years as royalty for her work on a finance book. What is the present value of her royalty income if the opportunity cost is 12 percent?

  What would its future value be

What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be?

  Bond issued-what is the quoted annualized coupon rate

You are considering buying a bond issued by General Motors with exactly 5.5 years remaining to maturity that just paid a coupon yesterday. It rained on your paper this morning so you do not know what the coupon rate is. However you are able to see th..

  Estimate average working capital required

Calculate with explanation the unit costs of the souvenirs and determine the price of the souvenirs and explain any other information that might be relevant for deciding the price

  Expected return-market risk premium

Stock Y has a beta of 1.05 and an expected return of 13 percent. Stock Z has a beta of .70 and an expected return of 9 percent. If the risk-free rate is 5 percent and the market risk premium is 7 percent, are these stocks correctly priced?

  Pension plan is obligated to make disbursements

A pension plan is obligated to make disbursements of $1.7 million, $2.7 million, and $1.7 million at the end of each of the next three years, respectively. The annual interest rate is 8%. If the plan wants to fully fund and immunize its position, how..

  Compute the cost of capital for the firm

Compute the cost of capital for the firm for the following: a. A bond that has a $1,000.00 par value (face value) and a contract or coupon interest rate of 11.7 percent. Interest payments are $58.50 and are paid semi annually. The bonds have current ..

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!

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