a. Debt to Equity Ratio =Market Value of Debt to Market Value of
Equity =9.48/23.7 =0.40
b. Cost of Equity =Risk free Rate+Beta*(Market Return -Risk Free
Rate) =6%+1.22*(11%-6%) =12.10%
WACC =Weight of Equity*Cost of Equity+Weight of Debt*Cost of
Debt
=1/(0.4+1)*12.10%+0.4/(1+0.4)*6% =10.36%
c. Cost of capital of all equity firm will be same as WACC in all
equity firm without taxes as in MM i proposition =10.36%
Harris, Inc., has equity with a market value of $23.7 million and debt with a market...
Hatter, Inc., has equity with a market value of $23.3 million and debt with a market value of $6.99 million. The cost of debt is 9 percent per year. Treasury bills that mature in one year yield 5 percent per year, and the expected return on the market portfolio over the next year is 12 percent. The beta of the company’s equity is 1.18. The firm pays no taxes. a. What is the company’s debt?equity ratio? (Do not round intermediate...
Please Show all work and formulas Harris, Inc., has equity with a market value of $22.3 million and debt with a market value of $11.15 million. Treasury bills that mature in one year yield 4 percent per year and the expected return on the market portfolio is 10 percent. The beta of the company's equity is 1.08. The company pays no taxes. a. What is the company's debt-equity ratio? (Do not round intermediate calculations and round your answer to 2...
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