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Twice Shy Industries has a debt−equity ratio of 1.2. Its WACC is 9 percent, and its cost of debt is 5.7 percent. The corporate tax rate is 35 percent. a. What is the company’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity capital % b. What is the company’s unlevered cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Unlevered cost of equity capital % c-1 What would the cost of equity be if the debt−equity ratio were 2? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % c-2 What would the cost of equity be if the debt−equity ratio were 1.0? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % c-3 What would the cost of equity be if the debt−equity ratio were zero? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $120,000 and sell its old low-pressure glueball, which is fully depreciated, for $20,000. What is the equivalent annual savings from the purchase..
Pricing is a critical decision made by a marketing executive because price has a direct effect on a firm’s profits. Note the six major steps in the process organizations go through in setting prices on pages 322–323. Step one involves identifying pri..
An income statement prepared according to GAAP:
Comment on this design. Identify biases, concerns, and why you might question any results. Suggest an improved design. Be sure to specify your design completely; include a diagram if appropriate; discuss how you would implement your study.
Assume that the corporate tax rate is 34% and the personal tax rate is 30%. The founders of a newly formed business are debating between setting up the firm as a partnership versus a corporation. What is the difference in the percentage of the firm's..
Crum Co’s balance sheet and income statement for 2001 are given below. The firm expects sales to grow by 50% in 2002. Operating costs, spontaneous liabilities and assets will increase in proportion to sales. What is the company’s projected funds need..
Contracting Inc. is bidding upon a service contract for Harvard to maintain and upgrade three classrooms per year for the next nine years. The contract will require purchasing $1,872,000 in equipment that will be depreciated using straight-line depre..
On December 31, Beth Klemkosky bought a yacht for $50,000. She paid $12,000 down and agreed to pay the balance in 15 equal annual installments that include both the principal and 13 percent interest on the declining balance. If Beth agrees to pay the..
The five basic principles of finance include all of the following EXCEPT Cash flow is what matters. Money has a time value. Risk requires a reward. Incremental profits determine value.
1 in 1930 the highest paid player in major league baseball was babe ruth of the new york yankees with an annual salary
Chapman Tech is expected to pay a$1.20 dividend at the end of the year. The required return on chapmans stock is 11% and its dividend is expected to grow at a constant rate of 7% per year. which stock has the highest dividend yield (DY)? which stock ..
OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares are selling for $17 per share, the preferred shares are selling for $26 per share, and the bonds ar..
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