What is its pretax cost of debt-cost of equity

Assignment Help Financial Management

Reference no: EM13942952

Blue Bull, Inc., has a target debt-equity ratio of .73. Its WACC is 8.7 percent, and the tax rate is 38 percent

Required:

(a) If the company’s cost of equity is 11.3 percent, what is its pretax cost of debt?(Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

(b) If the aftertax cost of debt is 5.5 percent, what is the cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Reference no: EM13942952

Questions Cloud

What is your company weighted average cost of capital : Your company's target capital structure is 30% debt and 70% equity. The company's after-tax cost of debt is 8%. The company's beta is 1.3, the risk-free rate is 4%, and the market risk premium is 6%. The marginal tax rate is 35%. What is your company..

Calculate the present value annuity in millions of dollars : You have won a lottery which will pay you 10 annual checks of $3 million each. Your checks will begin arriving starting a year from now. Calculate the present value annuity in millions of dollars of these cash flows assuming a discount rate of 5%.

Maximum number of shares you can buy if the initial margin : Carson Corporation stock sells for $59 per share, and you've decided to purchase as many shares as you possibly can. You have $39,000 available to invest. What is the maximum number of shares you can buy if the initial margin is 60 percent?

Considering relaxing its credit standards to encourage sales : Pueblo Corp. is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15% from the current level of 300 units per year. What is the cost of marginal investments in accounts receivable under the..

What is its pretax cost of debt-cost of equity : Blue Bull, Inc., has a target debt-equity ratio of .73. Its WACC is 8.7 percent, and the tax rate is 38 percent. If the company’s cost of equity is 11.3 percent, what is its pretax cost of debt?

An inverted yield curve means that : An inverted yield curve means that:

Terms has the highest cost of giving up the cash discount : Which of the following terms has the highest cost of giving up the cash discount, assuming a 365-day year?

Costs of goods sold-sell its inventory : Mario's Home Systems has sales of $2,720, costs of goods sold of $2,060, inventory of $484, and accounts receivable of $420. How many days, on average, does it take Mario's to sell its inventory?

Interest expenses-what is the operating cash flow : Your firm has net income of $338 on total sales of $1,420. Costs are $780 and depreciation is $120. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow?

User Account

All Pages