The cost of an MNC’s capital can be measured as the cost of its debt plus...
The cost of an MNC’s capital can be measured as the cost of its debt plus the cost of its equity, with appropriate weights applied to reflect the percentages of debt and equity.
True or False
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The cost of an MNC’s capital can be measured as the cost of its
debt plus...
1. The after-tax cost of debt is higher than the before-tax cost of debt. True or...
1. The after-tax cost of debt is higher than the before-tax cost of debt. True or False 2. The constant dividend growth model and CAPM are two ways of estimating a firm's cost of equity. True or False 3. The cost of capital uses the amounts of total assets and debt as the capital structure weights. True or False 4. In deriving the WACC, market values are preferred over book values for the capital structure weights. True or False 5....
Show how a firm can increase its cost of equity capital and its cost of debt...
Show how a firm can increase its cost of equity capital and its cost of debt capital, and still come out with an overall cost of capital that is unchanged. Q16.31
The weighted average cost of capital for a firm is dependent upon the firm's level of...
The weighted average cost of capital for a firm is dependent upon the firm's level of risk. TRUE OR FALSE It is generally better to base estimates of the WACC on book value weights of debt and equity since market values, particularly those for equity, tend to fluctuate widely. TRUE OR FALSE Ignoring taxes, if a firm issues debt at par, then the YTM cannot be computed. TRUE OR FALSE
Which of the following statements is TRUE when estimating cost of capital? a) The cost of...
Which of the following statements is TRUE when estimating cost of capital? a) The cost of debt should be based on the coupon rate of current debt. b) The cost of equity capital should be based on the historical average cost of equity. c) Use either target capital structure weights or market value capital structure weights to estimate the WACC. d) All of the above are true.
The proportions of debt and equity used to determine the weighted average cost of capital for...
The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the market value of debt and equity outstanding. True False Question 38 (0.2 points) Saved Distinguishing between fixed and variable costs will enable one to calculate the sensitivity of EBITDA to changes in revenue. True False
1. Master Inc. Master has no debt and its cost of equity capital is 10%. The...
1. Master Inc. Master has no debt and its cost of equity capital is 10%. The average debt-to-value for companies in Master's industry is 20%. What would its cost of equity capital be if it took on the average amount of debt for its industry, at a cost of debt capital of 5%? Assume perfect markets.
Pharoah Corp. currently has a WACC of 18 percent. If the cost of debt capital for...
Pharoah Corp. currently has a WACC of 18 percent. If the cost of debt capital for the firm is 11 percent and the firm is currently financed with 50 percent debt, then what is the current cost of equity capital for the firm? Assume that the assumptions in Modigliani and Miller’s Proposition 1 hold. (Round answer to 2 decimal places, e.g. 17.54%.) Current cost of equity capital enter the current cost of equity capital in percentages rounded to 2 decimal...
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at...
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 8%, and its common stock currently pays a $3.25 dividend per share (D0 = $3.25). The stock's price is currently $31.50, its dividend is expected to grow at a constant rate of 9% per year, its tax rate is 25%, and its WACC is 14.45%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your...
Sandpiper Inc. is estimating its weighted average cost of capital (WACC). Sandpiper’s capital structure weights on...
Sandpiper Inc. is estimating its weighted average cost of capital (WACC). Sandpiper’s capital structure weights on debt, preferred stock, and equity are 40%, 0%, and 60%, respectively. Its corporate tax rate is 30%. The expected returns required by holders of debt and equity are 6.00% and 10.50%, respectively. Compute Sandpiper’s WACC. 6.55% 7.98% 8.11% 8.25% 9.75% 10.00%
(Defining capital structure weights) In August 2015 the capital structure of the Emerson Electric Corporation (EMR)...
(Defining capital structure weights) In August 2015 the capital structure of the Emerson Electric Corporation (EMR) (measured in book and market values) was as follows: ($ Millions) Short-term debt Long-term debt Common equity Total capital Book Value $2,466 4,272 8,126 $14,864 Market Value $2,466 4,272 35,709 $42,447 What weights should Emerson use when computing the firm's weighted average cost of capital? The appropriate weight of debt, wg, is %. (Round to one decimal place.)
Show how a firm can increase its cost of equity capital and its cost of debt capital, and still come out with an overall cost of capital that is unchanged. Q16.31
The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the market value of debt and equity outstanding. True False Question 38 (0.2 points) Saved Distinguishing between fixed and variable costs will enable one to calculate the sensitivity of EBITDA to changes in revenue. True False
1. Master Inc. Master has no debt and its cost of equity capital is 10%. The average debt-to-value for companies in Master's industry is 20%. What would its cost of equity capital be if it took on the average amount of debt for its industry, at a cost of debt capital of 5%? Assume perfect markets.
(Defining capital structure weights) In August 2015 the capital structure of the Emerson Electric Corporation (EMR) (measured in book and market values) was as follows: ($ Millions) Short-term debt Long-term debt Common equity Total capital Book Value $2,466 4,272 8,126 $14,864 Market Value $2,466 4,272 35,709 $42,447 What weights should Emerson use when computing the firm's weighted average cost of capital? The appropriate weight of debt, wg, is %. (Round to one decimal place.)
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