The rquired return on ABC Corp's debt is 6%.ABC Corp's pays 25% taxes.What is ABC corp's...
The rquired return on ABC Corp's debt is 6%.ABC Corp's pays 25% taxes.What is ABC corp's after tax debt?
Homework Answers
After tax debt is given as equal to=required return on debt*(1-tax rate)=6%*(1-25%)=4.50%
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The rquired return on ABC Corp's debt is 6%.ABC Corp's
pays 25% taxes.What is ABC corp's...
A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total...
A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total common equity. The tax rate s 40%. Cost of debt is equal to 6%, cost of preferred stock is equal to 7.5%, and cost of equity is equal to 12%. If there target capital structure is 30% debt, 5% preferred stock, and 65% common stock, what is the WACC it should use to evaluate future projects?
The after tax cost of debt is the interest rate that a firm pays on any...
The after tax cost of debt is the interest rate that a firm pays on any new debt financing. Water and Power Company (WPC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax rate is 25%. WPC's after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These...
ABC Inc. has 10,000 shares of common stock and 3,000 units of debt. Each unit of...
ABC Inc. has 10,000 shares of common stock and 3,000 units of debt. Each unit of debt has a face value of $100, 6% coupon rate, and 10 years to maturity. The common stock has a standard deviation of return of 30% and a correlation coefficient with S&P 500 return of 0.75. The S&P500 has a return of 12.5% and a standard deviation of return of 20%. The T-bill rate is 3.5%. The debt has a default risk premium of...
The is the interest rate that a firm pays on any new debt financing. Wat after-tax...
The is the interest rate that a firm pays on any new debt financing. Wat after-tax cost of debt VPC) can borrow funds at an interest rate of 10.20% for a period of five years. Its marginal federal-plus-state tax rate is 25% before-tax cost of debt Pebt is __ (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a...
ABC Corporation has the following capital structure: Debt &nbs
ABC Corporation has the following capital structure: Debt $35 million Preferred Stock $20 million Common Equity (Retained Earnings) $45 million Yield to maturity = 12% Tax rate = 40% After-tax cost of debt = 7.2% Cost of preferred stock = 8.93% Next year dividends = $ 4share Growth Rate = 10% Current Price = $45/share Cost of retained earnings = 18.89% Risk-free rate = 5% Return the (stock) Market = 12% Beta = 1.5 Cost of Equity =...
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of...
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $ 6 comma 000 on which it pays interest of 10 % each year. Both companies have identical projects that generate free cash flows of $ 6 comma 100 or $ 6 comma 200 each year. After paying any interest on debt, both companies use all remaining free cash flows to pay dividends each year. a. In the table below, fill in the debt...
is the interest rate that a firm pays on any new debt financing. The before-tax cost of debt mpany (PRC) can borrow fun...
is the interest rate that a firm pays on any new debt financing. The before-tax cost of debt mpany (PRC) can borrow funds at an interest rate of 10.20% for a period of six years. Its marginal federal-plus-state Perp (rounded to two decimal places). taxafter-tax cost of debt ax cost of debt is At the present time, Perpetualcold Refrigeration Company (PRC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market...
ABC Corp has a target capital structure of 30% Debt, 20% Preferred Equity and 50% Common Stock. (1) ABC Corp had a 4.5%...
ABC Corp has a target capital structure of 30% Debt, 20% Preferred Equity and 50% Common Stock. (1) ABC Corp had a 4.5% after tax cost of debt. (2) ABC Corp has a 5% Cost of preferred equity (3) ABC Corp has a 8% cost of Common equity. Calculate ABC Corps WACC.?
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of...
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $4,000 on which it pays interest of 9% each year. Both companies have identical projects that generate free cash flows of $700 or $1,100 each year. After paying any interest on debt, both companies use all remaining free cash flows to pay dividends each year a. In the table below, fill in the debt payments and equity dividends each firm will receive given each...
Q3. (10 Points) The debt-to-equity ratio of the CI Corp. is 0.5. To calculate the CI...
Q3. (10 Points) The debt-to-equity ratio of the CI Corp. is 0.5. To calculate the CI Corp's cost of equity, use the following information: The CI Corp's beta is 1.2, expected return on the market is 8%, and the risk-free rate is 2%. Its pretax cost of debt is 4%, what is the company's WACC? The tax rate is 35%. Q4. (10 Points) You are trying to estimate the value of the Smoothie company. The expected after-tax cashflows from assets...
The after tax cost of debt is the interest rate that a firm pays on any new debt financing. Water and Power Company (WPC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax rate is 25%. WPC's after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These...
The is the interest rate that a firm pays on any new debt financing. Wat after-tax cost of debt VPC) can borrow funds at an interest rate of 10.20% for a period of five years. Its marginal federal-plus-state tax rate is 25% before-tax cost of debt Pebt is __ (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a...
is the interest rate that a firm pays on any new debt financing. The before-tax cost of debt mpany (PRC) can borrow funds at an interest rate of 10.20% for a period of six years. Its marginal federal-plus-state Perp (rounded to two decimal places). taxafter-tax cost of debt ax cost of debt is At the present time, Perpetualcold Refrigeration Company (PRC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market...
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $4,000 on which it pays interest of 9% each year. Both companies have identical projects that generate free cash flows of $700 or $1,100 each year. After paying any interest on debt, both companies use all remaining free cash flows to pay dividends each year a. In the table below, fill in the debt payments and equity dividends each firm will receive given each...
Q3. (10 Points) The debt-to-equity ratio of the CI Corp. is 0.5. To calculate the CI Corp's cost of equity, use the following information: The CI Corp's beta is 1.2, expected return on the market is 8%, and the risk-free rate is 2%. Its pretax cost of debt is 4%, what is the company's WACC? The tax rate is 35%. Q4. (10 Points) You are trying to estimate the value of the Smoothie company. The expected after-tax cashflows from assets...
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