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Acetate, Inc., has equity with a market value of $35 million and debt with a market value of $15 million. Treasury bills that mature in one year yield 2% per year, and the expected return on the market portfolio is 10%. The beta of Acetate's equity is 1.15. The firm pays no taxes.a. What is Acetate's debt-equity ratio?b. Assume Acetate could borrow at the Treasury rate. What is Acetate's WACC? (hint: use CAPM to solve for the cost of equity first)c. What is the cost of capital for an otherwise identical all-equity firm? (hint: use MM proposition II)d. What conclusion(s) could be drawn from your answers to part b and part c?
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A company is evaluating a capital project on a new line of business for the firm. The firm's current cost of capital is 12%. However, another firm, whose principal focus is in the same field, is publicly traded and has a beta of 1.6. The market is cu..
I know that the corporate bond would yield 7.00%(1-.30) = 4.9%, but I would like to learn how to calculate the muni bond. Thanks!
Analysts are forecasting that SimpleCorp will report free cash flow in the coming years as follows, In addition, analysts expect SimpleCorp shares to experience no multiple expansion or contraction and therefore to trade throughout the forecast an in..
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Suppose you're a business executive in the year 2015. How is the business world different than it was when you were a master's degree student in 2006.
Why is economic growth important? Why could the difference between the 2.5 percent and 3 percent annual growth rate be of great significance over many decades?
Suppose the Japanese yen spot exchange rate is 118 yen = $1.00, and the British pound spot exchange rate is 1 pound = $1.81.
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