4. Bolivia firm is planning to have a target capital structure 60% debt and 40% equity....

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4. Bolivia firm is planning to have a target capital structure 60% debt and 40% equity. Suppose the cost of equity for an unlevered firm is 10% and the before tax cost of debt issued is constant at 6%. a. Calculate the Weighted Average Cost of Capital (WACC) for the Levered Firm assuming the corporate tax rate is 40% (3 points) b. Calculate the Market Value of Levered Firm and the Market Value of Equity for Levered Firm if the firm operating income is $1,000,000 and corporate tax rate is 40% (3 points). 5. Daimler Corp is operating in a country U where the corporate tax is 40%, personal income tax on bond investment is 28% while the personal tax on stock is 20%. Assume t Daimler Corp earnings before interest and taxes is $9,900,000 and cost of equity with no debt is 9%. (a) If Daimler current has $6 million total market value of debt financing, what would be the market value of the company of Daimler Corp in this country U? (3 points) (b) What is the proportion of debt (wd) and equity (ws) financing for Daimler Corp with financial leverage? (3 points) 4. Bolivia firm is planning to have a target capital structure 60% debt and 40% equity. Suppose the cost of equity for an unlevered firm is 10% and the before tax cost of debt issued is constant at 6%. a. Calculate the Weighted Average Cost of Capital (WACC) for the Levered Firm assuming the corporate tax rate is 40% (3 points) b. Calculate the Market Value of Levered Firm and the Market Value of Equity for Levered Firm if the firm operating income is $1,000,000 and corporate tax rate is 40% (3 points). 5. Daimler Corp is operating in a country U where the corporate tax is 40%, personal income tax on bond investment is 28% while the personal tax on stock is 20%. Assume t Daimler Corp earnings before interest and taxes is $9,900,000 and cost of equity with no debt is 9%. (a) If Daimler current has $6 million total market value of debt financing, what would be the market value of the company of Daimler Corp in this country U? (3 points) (b) What is the proportion of debt (wd) and equity (ws) financing for Daimler Corp with financial leverage? (3 points)

Answer rating: 100% (QA)

4 Bolivia Firm a Calculate WACC Formula WACC Wd Rd 1 Tc Ws Re Inputs Wd weight of debt 60 Rd beforet... View the full answer