Homework Answers
Objective
the above will be the answer..
because it consider project wise beta or risk levels to compute WACC
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The approach to computing a divisional weighted average cost of capital (WACC) uses the average beta...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.7, 1.0, 1.4, and 1.6, respectively. Assume all current and future projects will be financed with 50 debt and 50 equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 6 percent) is 13 percent and the after-tax yield on...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.7, 1.0, 1.4, and 1.6, respectively. Assume all current and future projects will be financed with 60 debt and 40 equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 7 percent) is 15 percent and the after-tax yield on...
Suppose your firm has decided to use a divisional WACC approach to analyze projects, The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects, The firm currently has four divisions, A through D, with average betas for each division o 0.9, 1.0, 1.6, and 1.7, respectively. Assume all current and future projects will be financed with 50 debt and 50 equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 4 percent) is 13 percent and the after-tax yield on...
1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, i...
1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity. In general, debt is less expensive than equity because it is less risky to the investors. Some managers may intend to increase the usage of debt, therefore increase the weight on debt (Wd). Do you think by increasing the weight on debt (Wj) will reduce the WACC infinitely? What are the benefits and costs...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions A throughb D with average betas for each division of 0.8 1.2 1.4 and 1.6 respectively. Assume all current and future projects will be financed with 20 percent debt and 80 percent equity the current cost of equity firm beta of 1.1 and a current risk free rate of 7 is 11 percent and the after tax yoeld on the...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.9, 1.3, 1.4, and 1.5, respectively. Assume all current and future projects will be financed with 20 percent debt and 80 percent equity, the current cost of equity (based on an average firm beta of 1.3 and a current risk-free rate of 3 percent) is 11 percent and the after-tax...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.6, 1.0, 1.3, and 1.6, respectively. Assume all current and future projects will be financed with 60 debt and 40 equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 6 percent) is 11 percent and the after-tax yleld on...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.7, 1.3, 1.4, and 1.6, respectively. Assume all current and future projects will be financed with 20 percent debt and 80 percent equity, the current cost of equity (based on an average firm beta of 1.1 and a current risk-free rate of 4 percent) is 14 percent and the after-tax...
10.00 points Suppose your irm has decided to use a divisional WACC approach to analyze projects....
10.00 points Suppose your irm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.8, 1.2, 1.4, and 1.6, respectively Assume all current and future projects will be financed with 20 percent debt and 80 percent equity, the current cost of equity (based on an average firm beta of 1 1 and a current risk-free rate of 7 percent) is 11 percent...
PLEASE DETAIL THE ANSWERS Assume that BF, Inc., has 10,000 bonds outstanding, paying a 5.6 percent...
PLEASE DETAIL THE ANSWERS Assume that BF, Inc., has 10,000 bonds outstanding, paying a 5.6 percent coupon rate semi- annually and with a par value of $1,000 per bond. They all mature in 25 years and currently sell for 97 percent of par. Their current yield to maturity is 6.4%. The firm’s marginal tax rate is 35%. The company also has 435,000 shares outstanding, currently selling for $61 per share. The stock beta of the company is currently estimated at...
Suppose your firm has decided to use a divisional WACC approach to analyze projects, The firm currently has four divisions, A through D, with average betas for each division o 0.9, 1.0, 1.6, and 1.7, respectively. Assume all current and future projects will be financed with 50 debt and 50 equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 4 percent) is 13 percent and the after-tax yield on...
1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity. In general, debt is less expensive than equity because it is less risky to the investors. Some managers may intend to increase the usage of debt, therefore increase the weight on debt (Wd). Do you think by increasing the weight on debt (Wj) will reduce the WACC infinitely? What are the benefits and costs...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.9, 1.3, 1.4, and 1.5, respectively. Assume all current and future projects will be financed with 20 percent debt and 80 percent equity, the current cost of equity (based on an average firm beta of 1.3 and a current risk-free rate of 3 percent) is 11 percent and the after-tax...
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.6, 1.0, 1.3, and 1.6, respectively. Assume all current and future projects will be financed with 60 debt and 40 equity, the current cost of equity (based on an average firm beta of 1.0 and a current risk-free rate of 6 percent) is 11 percent and the after-tax yleld on...
10.00 points Suppose your irm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.8, 1.2, 1.4, and 1.6, respectively Assume all current and future projects will be financed with 20 percent debt and 80 percent equity, the current cost of equity (based on an average firm beta of 1 1 and a current risk-free rate of 7 percent) is 11 percent...
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