Homework Answers
Marathon’s cost of retained earnings using Bond Yield plus risk premium approach
Marathon’s cost of retained earnings using Bond Yield plus risk premium approach = Marathon’s Bond Yield + Marathon’s Risk Premium
= 6.75% + 5.25%
= 12.00%
“Hence, the Marathon’s cost of retained earnings using Bond Yield plus risk premium approach will be 12.00%”
Add Answer to:
Marathon Inc. is a privately held company that would like to estimate its WACC. Indetermining its...
please complete all parts to the question 4. The cost of retained earnings the required rate...
please complete all parts to the question
4. The cost of retained earnings the required rate of return on retained earnings, it If a firm cannot invest retained earnings to earn a rate of return should return those funds to its stockholders, The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.23% while the market risk premium is 5.75%. The Jefferson Company has a beta of 1.56. Using the capital asset pricing model...
Cargill's Cost of Capital. Cargill is generally considered to be the largest privately held company in...
Cargill's Cost of Capital. Cargill is generally considered to be the largest privately held company in the world. Headquartered in Minneapolis, Minnesota, the company has been averaging sales of over $115 billion per year over the past five-year period. Although the company does not have publicly traded shares, it is still extremely important for it to calculate its weighted average cost of capital properly in order to make rational decisions on new investment proposals. Assuming a risk-free rate of 4.50%,...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, beca...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (rrF) is 4.67% while the market risk premium is 5.75%. The Allen Company has a beta of 1.56. Using the capital asset pricing model (CAPM) approach, Allen's...
3- Your company is estimating its WACC. Its target capital structure is 30 percent debt, 10 perce...
3- Your company is estimating its WACC. Its target capital structure is 30 percent debt, 10 percent preferred stock, and 60 percent common equity. Its bonds have an 8 percent coupon, paid quarterly, a current maturity of 15 years, and sell for $895. The firm could sell, at par, $100 preferred stock which pays $10 annual dividend, but flotation costs of 5 incurred if the company will ssue new preferred stocks. This company's beta is 1.3, the risk-free rate is...
True or False: It is free for a company to raise money through retained earnings, because...
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67%, while the market risk premium is 6.17%. the Jefferson Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Jefferson's cost of equity is The cost...
4. The cost of retained earnings True or False: It is free for a company to...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False True The current risk-free rate of return is 4.60% and the current market risk premium is 5.70%. Green Caterpillar Garden Supplies Inc. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Green Caterpillar's cost of equity is Cute...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk premium that is equal to the nsk premium on an average stock, (M ), scarea up or down to reflect the particular stock's risk as measured by its beta coefficient, b. This model assumes that a firm's stockholders are Select diversified, but if they are Select diversified, then the firm's true investment risk would not be measured by Select and the CAPM estimate would...
If reliable inputs for the CAPM are not available as would be true for a closely...
If reliable inputs for the CAPM are not available as would be true for a closely held company, analysts often use a subjective procedure to estimate the cost of equity. Empirical studies suggest that the risk premium on a firm's stock over its own bonds generally ranges from 3 to 5 percentage points. The equation is shown as: rs = Bond yield + Risk premium. Note that this risk premium is the risk premium given in the CAPM. This method...
Calculate the WACC which represents the "hurdle rate" for a typical project with average risk using...
Calculate the WACC which represents the "hurdle rate" for a typical project with average risk using the average of the range of the marginal cost of common equity using retained earnings or new earnings. Data: A 15-year, 12% coupon, semiannual payment non-callable bonds sell for $1,153.72. New bonds will be privately placed with no flotation cost.. A 10%, $1,000 par value, annually dividend, perpetual preferred stock sells for $1,111. Both an existing common stock and a new common stock issue,...
5. The cost of retained earnings1 True or False: It is free for a company to...
5. The cost of retained earnings1 True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (Rp) is 3.86%, while the market risk premium is 5.75%, the Allen Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Allen's...
please complete all parts to the question
4. The cost of retained earnings the required rate of return on retained earnings, it If a firm cannot invest retained earnings to earn a rate of return should return those funds to its stockholders, The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.23% while the market risk premium is 5.75%. The Jefferson Company has a beta of 1.56. Using the capital asset pricing model...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (rrF) is 4.67% while the market risk premium is 5.75%. The Allen Company has a beta of 1.56. Using the capital asset pricing model (CAPM) approach, Allen's...
3- Your company is estimating its WACC. Its target capital structure is 30 percent debt, 10 percent preferred stock, and 60 percent common equity. Its bonds have an 8 percent coupon, paid quarterly, a current maturity of 15 years, and sell for $895. The firm could sell, at par, $100 preferred stock which pays $10 annual dividend, but flotation costs of 5 incurred if the company will ssue new preferred stocks. This company's beta is 1.3, the risk-free rate is...
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67%, while the market risk premium is 6.17%. the Jefferson Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Jefferson's cost of equity is The cost...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False True The current risk-free rate of return is 4.60% and the current market risk premium is 5.70%. Green Caterpillar Garden Supplies Inc. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Green Caterpillar's cost of equity is Cute...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk premium that is equal to the nsk premium on an average stock, (M ), scarea up or down to reflect the particular stock's risk as measured by its beta coefficient, b. This model assumes that a firm's stockholders are Select diversified, but if they are Select diversified, then the firm's true investment risk would not be measured by Select and the CAPM estimate would...
Calculate the WACC which represents the "hurdle rate" for a typical project with average risk using the average of the range of the marginal cost of common equity using retained earnings or new earnings. Data: A 15-year, 12% coupon, semiannual payment non-callable bonds sell for $1,153.72. New bonds will be privately placed with no flotation cost.. A 10%, $1,000 par value, annually dividend, perpetual preferred stock sells for $1,111. Both an existing common stock and a new common stock issue,...
5. The cost of retained earnings1 True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (Rp) is 3.86%, while the market risk premium is 5.75%, the Allen Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Allen's...
Most questions answered within 3 hours.
-
what is IoT? How is it being used today? How will it be used in
the...
asked 1 minute ago -
Please answer the four questions below.
1. If you were going to test a method that...
asked 16 minutes ago -
Provide two or three examples of support he uses to reinforce
his arguments?
The Alienation of...
asked 23 minutes ago -
QUESTION 1
Why do we see terms with multiple names in the database
community?
Consistency is...
asked 19 minutes ago -
In a titration experiment, 11.5 mL of 0.400 M H2SO4 neutralized
48.0 mL of NaOH. What...
asked 23 minutes ago -
A shot-putter throws the shot with a horizontal velocity of 10
m/s and a
vertical velocity...
asked 38 minutes ago -
Mildred sells industrial-sized refrigeration units. Her
prospective buyer's face looks tense, and his forehead is wrinkled....
asked 40 minutes ago -
Clark Heter is an industrial engineer at Lyons Products. He
would like to determine whether there...
asked 1 hour ago -
3. Use a text editor to create a comma-delimited file of user
IDs and passwords. Revise...
asked 1 hour ago -
Jensen and Associates has a projected balance
sheet that includes the following accounts. What is the...
asked 55 minutes ago -
implement a doubly-linked list in C. Each node in the linked list should contain a string,...
asked 1 hour ago -
What are some best practices and things to avoid when developing
a PowerPoint presentation or file
asked 1 hour ago