Homework Answers
Debt-equity ratio = Market value of debt / market value of equity
Debt-equity ratio = 900,000,000 / 2,400,000,000
Debt-equity ratio = 0.375
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Jürgen Knudsen has been hired to provide industry expertise to Henrik Sandell, CFA, an analyst for a pension plan...
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project requires a country equity premium to capture the risk of
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IT:
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As part of the sensitivity analysis of the effect of the new
project on the company’s cost of capital, Sandell is estimating the
cost of equity of the China project considering that the China
project requires a country equity premium to capture the risk of
the project. What is the cost of equity for the project taking into
account the country risk? USE THE FOLLOWING FORMULA TO CALCULATE
IT:
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CCost of Debt = 2%
Sun Solar has earnings before interest and taxes of $106 million and considering making a change to its capital structure to reduce its cost of capital and increase firm value. Right now, Sun is all equity with unlevered cost of capital of 12 % based on CAPM. The risk- free rate is 6%, the market risk premium (MRP=RM - RRF) of 5% and tax rate of 40%. 1. What would be Sun's estimated levered cost...
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