Stol Pues es = 30) Assume that Mary Brown Inc. hired you as a consultant to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Stol Pues es = 30) Assume that Mary Brown Inc. hired you as a consultant to help it estimate the cost of capital. You have been provided with the following data: Do $1.20; Po $40.00) and g = 7% (constant) Based on the DCF approach, what is Brown's cost of equity from retained earnings? = DI DI = 0₁ x g Porg a. 10.06% (5. 10.21% c. 10.37% d. 10.54% e. 10.68% nds 31) You were hired as a consultant to Locke Company, and you were provided with the following data: Target capital structure: 40% debt, 10% preferred, and 50% common equity. The interest rate on new debt is 7.5%, the yield on the preferred is 7.0%, the cost of retained earnings is 11.5%, and the tax rate is 40%. The firm will not be issuing any new stock. What is the firm's WACC? After tax cost of debt Rate of debt (1-TR) weighted avg WD XATC OF debt TwoP+Cost ORE a. 8.25% 5. 8.38% C. 8.49% d. 8.61% e. 8.76% 32) Browning Co. expects to earn $3.50 per share during the current year, its expected payout ratio is 40% its expected constant dividend growth rate is 4.0%, and its common stock currently sells for $40.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would the cost of equity from new common stock be? Gorden model floatation cost Pox (1-fc) a. 7.56% b. 7.70% C. 7.89% d. 7.99% e. 8.12% rs-3 40 = D² -71 DI Rs D₁ = 3,50 x 407.-1.4 (₁-fc +9) -1.4 40 (1-70%) 1.40 g=B NI(EPS) ✓ RE DIV (DPs) NI DN = RE = Tatal #sh T#T#sho EPS+ DPS+ REK sh Page 6 Stol Pues es = 30) Assume that Mary Brown Inc. hired you as a consultant to help it estimate the cost of capital. You have been provided with the following data: Do $1.20; Po $40.00) and g = 7% (constant) Based on the DCF approach, what is Brown's cost of equity from retained earnings? = DI DI = 0₁ x g Porg a. 10.06% (5. 10.21% c. 10.37% d. 10.54% e. 10.68% nds 31) You were hired as a consultant to Locke Company, and you were provided with the following data: Target capital structure: 40% debt, 10% preferred, and 50% common equity. The interest rate on new debt is 7.5%, the yield on the preferred is 7.0%, the cost of retained earnings is 11.5%, and the tax rate is 40%. The firm will not be issuing any new stock. What is the firm's WACC? After tax cost of debt Rate of debt (1-TR) weighted avg WD XATC OF debt TwoP+Cost ORE a. 8.25% 5. 8.38% C. 8.49% d. 8.61% e. 8.76% 32) Browning Co. expects to earn $3.50 per share during the current year, its expected payout ratio is 40% its expected constant dividend growth rate is 4.0%, and its common stock currently sells for $40.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would the cost of equity from new common stock be? Gorden model floatation cost Pox (1-fc) a. 7.56% b. 7.70% C. 7.89% d. 7.99% e. 8.12% rs-3 40 = D² -71 DI Rs D₁ = 3,50 x 407.-1.4 (₁-fc +9) -1.4 40 (1-70%) 1.40 g=B NI(EPS) ✓ RE DIV (DPs) NI DN = RE = Tatal #sh T#T#sho EPS+ DPS+ REK sh Page 6
Expert Answer:
Answer rating: 100% (QA)
30 The cost of equity can be calculated as Re D1 Po g D1 D0 1 ... View the full answer
Related Book For
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt
Posted Date:
Students also viewed these finance questions
-
A large organization has hired you as a consultant to identify day-to-day activities for middle managers to minimize distributive and procedural injustice. The company explains that employees have...
-
The FCC has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue....
-
The United Nations has hired you as a consultant to help identify factors that predict manufacturing growth in developing countries. You have decided to use multiple regression to develop a model and...
-
You are asked to verify Kepler's Laws of Planetary Motion. For these exercises, assume that each planet moves in an orbit given by the vector- valued function r. Let r = ||r||, let G represent the...
-
A bond of the Visador Corporation pays $70 in annual interest, with a $1,000 par value. The bond matures in 17 years. The markets required yield to maturity on a comparable-risk bond is 8.5 percent....
-
Hydrogen bonding is quite strong in the case of acetic acid and persists even in the gas phase where two molecules from a dimer held together by two hydrgens bonds. Suggest a structure for the...
-
An effective way to learn how companies respond to the competing pressures to be globally integrated and locally responsive is to study them in action. Referring back to Exhibit 6.3, search online...
-
Data for Sedgwick Company are presented in E12-8. In E12-8, Sedgwick Company at December 31 has cash $20,000, noncash assets $100,000, liabilities $55,000, and the following capital balances: Floyd...
-
The example may be a sales tax or income tax proposal at any level of government. In your initial post, explain the revenue proposal, and evaluate it for equity, adequacy of revenue generation,...
-
The bar codes above represent locations in a warehouse. How many units would be left in each location? If you picked 250 units from location 00000113774360000 If you picked 250 units from location 00...
-
By the early twenty-first century, what was the status of union membership in the private sector? a. Union membership steadily increased from 1900 to 2000. b. Less than 10 percent of workers in the...
-
Box Office Corporation sells tickets for cabaret shows, Broadway shows, concerts and other live performances in Toronto. It packages tickets into a season pass good for ten events and customers can...
-
If the auditor's risk assessment procedures suggest that internal control in the inventor and production cycle is weak, he/she will: a. increase his test of controls. b. increase his substantive...
-
a) You have been asked to value two bonds a corporate bond and a government bond. Both bonds are issued in the same currency and country and have the following details: Government Face Value 1,000...
-
Construct a checklist for dyscalculia which should consist of numeracy, and pre- number concept challenges. QUESTION 2 (8 marks) As a future teacher you have to make major decisions in preparation of...
-
On June 1, 202X, a cell phone expense for $125 was debited to Repair Expense. On June 10, 202X, this error was found. Prepare the corrected journal entry. When would a correcting entry not be needed?
-
Frantic Fireworks, Inc. has a beta of 1.25. The market risk premium is 8%, the prime interest rate is 2%, the risk free T-bill rate is 3%, the inflation rate is 4%, and the economic growth rate is...
-
A seasonal index may be less than one, equal to one, or greater than one. Explain what each of these values would mean.
-
Lone Mountain Extraction, which mines ore in Idaho, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred in December, the low point of...
-
Refer to the product costs developed in requirement (5) of Problem 560. Prepare a table showing how Gigabytes traditional volume-based product-costing system distorts the product costs of gismos,...
-
RELY Cleaning Services, Inc., was started a number of years ago by Rick Ely to provide cleaning services to both large and small businesses in their home city. Over the years, as local businesses...
-
Who was Phar-Mors flamboyant Chief Executive Officer?
-
Which of the following generally is not considered something of value? 1. Cash, money or checks 2. Airline miles or hotel credits associated with frequent activity (e.g., frequent flier miles) 3. An...
-
Can you create a graphic that highlights each incidence where Fairmont was not in compliance with company policy that requires explicit approval of all hours of eighty hours or more?
Study smarter with the SolutionInn App