Homework Answers
cost of equity capital for this firm
=((D0*(1+g))/p)+g
=((20000*(1+7%))/700000)+7%
=10.06% this will be the answer
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An all-equity firm produced a dividend flow of $20,000 last year. The market value of the...
This Test: 45 pts poss An all-equity firm produced a dividend flow of $40,000 last year....
This Test: 45 pts poss An all-equity firm produced a dividend flow of $40,000 last year. The market value of the firm is $725,000 and the dividend is expected to increase at 6% each year. What is the cost of equity capital for this firm? O A. 11.85% OB. 11.26% O C. 13.03% OD. 10.66%
2) (18 Marks)Torcara Inc. is currently an all-equity firm with a market value of $4,000,000. Additionally,...
2) (18 Marks)Torcara Inc. is currently an all-equity firm with a market value of $4,000,000. Additionally, the firm plans to pay all its future earnings as cash dividends to its shareholders. Assume the following: T-Bill rate = 3% Expected return on the market = 10% Torcara's unlevered beta = 1 Part 1: Consider a world with no taxes and no bankruptcy costs: a) According to CAPM, what is the cost of equity for Torcara? (2 marks) b) What is the...
#4. Green Manufacturing is an all equity firm with a current market value of $20,000,000 and...
#4. Green Manufacturing is an all equity firm with a current market value of $20,000,000 and 500,000 shares outstanding. The current expected return on the firm's stock is 20%. Green plans to announce that it will issue $2,000,000 of perpetual bonds and use these funds to repurchase equity. The bonds will have a 6% interest rate. After the sale of the bonds and the share repurchase, Green will maintain the new capital structure indefinitely. The corporate tax rate for Green...
Cumina Stores is an all-equity-funded retailer looking for some guidance on dividend policy. Over the last...
Cumina Stores is an all-equity-funded retailer looking for some guidance on dividend policy. Over the last 3 years, the company has seen its revenues and net income increase and has maintained a dividend payout ratio of 40% of net income: Year 3 Years ago 2 Years ago Most recent year Revenues $1,000 $1,200 $1,500 Net Income $100 $120 $150 Depreciation $50 $60 $75 Over the same three year period, Cumina Stores has seen its cash balance decline from $ 60...
ABC Corporation is an all-equity firm. The total market value of the firm is $60 million...
ABC Corporation is an all-equity firm. The total market value of the firm is $60 million (which includes $20 million in cash), and there are 1,500,000 shares outstanding. There are no taxes. The firm is considering using $15 million of cash to pay a special one-time dividend or repurchase shares. The company’s current earnings per share are $5.00. If the firm pays the dividend, what will be the share price of ABC stock on the ex-dividend date? ABC Corporation is...
Hatter, Inc., has equity with a market value of $23.3 million and debt with a market...
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The current Free cash flow to the firm is $185 million. The interest expense to the...
The current Free cash flow to the firm is $185 million. The interest expense to the firm is $20 million. If the tax rate is 40% and the net debt of the firm increased by $15 million, what is the estimated value of the firm if the FCFE grows at 5% and the cost of equity is 10 % ? $2,168 million В. A. $2.397 million $3,760 million $3,948 million C. D. Cache Creek Manufacturing Company is expected to pay...
ABC Corporation is an all-equity firm. The total market value of the firm is $60 million...
ABC Corporation is an all-equity firm. The total market value of the firm is $60 million (which includes $20 million in cash), and there are 1,500,000 shares outstanding. There are no taxes. The firm is considering using $15 million of cash to pay a special one-time dividend or repurchase shares. The company’s current earnings per share are $5.00. If the firm pays the dividend, what will be the new earnings per share (EPS)?
Name: First Last FINC 321 ICPS 8 A firm has determined its optimal capital structure which...
Name: First Last FINC 321 ICPS 8 A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Additionally, the firm's marginal tax rate is 40 percent Source of Capital Long- term debt Preferred stock Common stock equity Market Proportions 20% 10 70 Debt: The firm can sell a 12-year, $1,000 par value, 7 percent annual bond for $880. Preferred Stock: The firm has determined it can issue preferred stock at...
Question #1 a) A firm has an asset with a market value of $20,000 and a...
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This Test: 45 pts poss An all-equity firm produced a dividend flow of $40,000 last year. The market value of the firm is $725,000 and the dividend is expected to increase at 6% each year. What is the cost of equity capital for this firm? O A. 11.85% OB. 11.26% O C. 13.03% OD. 10.66%
2) (18 Marks)Torcara Inc. is currently an all-equity firm with a market value of $4,000,000. Additionally, the firm plans to pay all its future earnings as cash dividends to its shareholders. Assume the following: T-Bill rate = 3% Expected return on the market = 10% Torcara's unlevered beta = 1 Part 1: Consider a world with no taxes and no bankruptcy costs: a) According to CAPM, what is the cost of equity for Torcara? (2 marks) b) What is the...
The current Free cash flow to the firm is $185 million. The interest expense to the firm is $20 million. If the tax rate is 40% and the net debt of the firm increased by $15 million, what is the estimated value of the firm if the FCFE grows at 5% and the cost of equity is 10 % ? $2,168 million В. A. $2.397 million $3,760 million $3,948 million C. D. Cache Creek Manufacturing Company is expected to pay...
Name: First Last FINC 321 ICPS 8 A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Additionally, the firm's marginal tax rate is 40 percent Source of Capital Long- term debt Preferred stock Common stock equity Market Proportions 20% 10 70 Debt: The firm can sell a 12-year, $1,000 par value, 7 percent annual bond for $880. Preferred Stock: The firm has determined it can issue preferred stock at...
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