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 calculations and round your
answer to 2 decimal places, e.g., 32.16.)
Debt–equity ratio _________
b. What is the company's weighted average cost of capital?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places, e.g.,
32.16.)
Weighted average cost of capital _________ %
c. What is the cost of capital for an otherwise identical
all-equity firm? (Do not round intermediate calculations.
Enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
Cost of capital __________ %
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Hatter, Inc., has equity with a market value of $23.3 million and debt with a market...
Harris, Inc., has equity with a market value of $23.7 million and debt with a market value of $9.48 million. Treasury bills that mature in one year yield 6 percent per year and the expected return on the market portfolio is 11 percent. The beta of the company's equity is 1.22. 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 decimal places, e.g., 32.16.) b. What...
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