Question: How does a firm s tax rate affect its cost of
How does a firm’s tax rate affect its cost of capital? What is the effect of the flotation costs associated with a new security issue on a firm’s weighted average cost of capital?
Answer to relevant Questionsa. Distinguish between internal common equity and new common stock. b. Why is there a cost associated with internal common equity? c. Describe two approaches that could be used in computing the cost of common equity. a. Rework Problem 9- 12 as follows: Assume an 8 percent coupon rate. What effect does changing the coupon rate have on the firm’s after- tax cost of capital? b. Why is there a change? Compute the cost of the following: a. A bond that has $ 1,000 par value (face value) and a contract or coupon interest rate of 11 percent. A new issue would have a flotation cost of 5 percent of the $ 1,125 market value. ...ExxonMobil (XOM) is one of the half- dozen major oil companies in the world. The firm has four primary operating divisions (upstream, downstream, chemical, and global services) as well as a number of operating companies that ...Determine the IRR on the following projects: a. An initial outlay of $ 10,000 resulting in a single free cash flow of $ 17,182 after 8 years b. An initial outlay of $ 10,000 resulting in a single free cash flow of $ 48,077 ...
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