Empire electric company uses only debt and common equity

Assignment Help Financial Management

Reference no: EM131562669

WACC

Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend (D0) was $3.25, its expected constant growth rate is 4%, and its common stock sells for $23. EEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 13%, and Project B's return is 9%. These two projects are equally risky and about as risky as the firm's existing assets.

What is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.

What is the WACC? Round your answer to two decimal places. Do not round your intermediate calculations.

Reference no: EM131562669

Questions Cloud

Discuss the multiple-application simpson one-third rule : Find the volume flow rate Q using the relationship Q = ?^?R0 2I?rI? dr, where r is the radial axis of the pipe, R is the radius of the pipe, and I?

Compute and interpret descriptive statistics : Your supervisor has asked you to prepare a brief report comparing the sales volumes and the consistency of sales of these four salespeople.

Calculate the consumption ratios for the four drivers : Bienestar company produces two types of get well cards scented and regular drivers for the four activities are as follows.scented cards,regular cardsinspection.

Identify root causes of known organizational issues : Develop a clear explanation of the organizational issues within the case study. Identify root causes of known organizational issues.

Empire electric company uses only debt and common equity : Empire Electric Company (EEC) uses only debt and common equity. What is its cost of common equity? What is the WACC?

Prepare a master budget for freshpak corporation : Freshpak Corporation manufactures two types of cardboard boxes used in shipping canned food, Prepare a master budget for Freshpak Corporation for the next year

Calculate the cost transferred out of each department : Suppose that Health blend decides to produce 2,000 bottles of multivitamins with the following cost there is no beginning or ending work in process.

What is the firm level of current liabilities : What is the firm;s level of current liabilities? What is the level of its inventories?

Determine the modulus of elasticity of the material : A solid circular rod that is 600 mm long and 20 mm in diameter is subjected to an axial force of P = 50 kN .

User Account

All Pages