Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt
Question:
Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a total current market value of $150 million. Suppose Rumolt’s equity cost of capital is 10%, and its debt cost of capital is 5%.
a. What is Rumolt’s pretax WACC?
b. If Rumolt’s corporate tax rate is 35%, what is its after-tax WACC?
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 53% (15 reviews)
Plan We can use Eq 162 to compute the firms WACC Execute a E 15 30 ...View the full answer
Answered By
Saikumar Ramagiri
Financial accounting:- Journal and ledgers, preparation of trail balance and adjusted trail balance Preparation of income statement, retained earning statement and balance sheet Banks reconciliation statements Financial statement analysis Cash flow statement analysis (both direct and indirect methods) All methods of Depreciations Management Accounting:- Ratios Budgeting control Cash budget and production budget Working capital management Receivable management Costing:- Standard and variance costing Marginal costing and decision making Cost-volume-profit analysis Inventory management (LIFO, FIFO) Preparation and estimation of cost sheet Portfolio management:- Calculation of portfolio standard deviation or risk Calculation of portfolio expected returns CAPM, Beta Financial management:- Time value of money Capital budgeting Cost of capital Leverage analysis and capital structure policies Dividend policy Bond value calculations like YTM, current yield etc International finance:- Derivatives Futures and options Swaps and forwards Business problems Finance problems Education (mention all your degrees, year awarded, Institute/University, field(s) of major): Education Qualification Board/Institution/ University Month/Year of Passing % Secured OPTIONALS/ Major ICWAI(inter) ICWAI inter Pursuing Pursuing - M.com(Finance) Osmania University June 2007 65 Finance & Taxation M B A (Finance) Osmania University Dec 2004 66 Finance & Marketing. B.Com Osmania University June 2002 72 Income Tax, Cost & Mgt, Accountancy, Auditing. Intermediate (XII) Board of Intermediate May 1999 58 Mathematics, Accountancy, Economics. S S C (X) S S C Board. May 1997 74 Mathematics, Social Studies, Science. Tutoring experience: • 10 year experience in online trouble shooting problems related to finance/accountancy. • Since 6 Years working with solution inn as a tutor, I have solved thousands of questions, quick and accuracy Skills (optional): Technical Exposure: MS Office, SQL, Tally, Wings, Focus, Programming with C Financial : Portfolio/Financial Management, Ratio Analysis, Capital Budgeting Stock Valuation & Dividend Policy, Bond Valuations Individual Skills : Proactive Nature, Self Motivative, Clear thought process, Quick problem solving skills, flexible to complex situations. Achievements : 1. I have received an Award certificate from Local Area MLA for the cause of getting 100% marks in Accountancy during my Graduation. 2. I have received a GOLD MEDAL/Scholarship from Home Minister in my MBA for being the “Top Rank student “ of management institute. 3. I received numerous complements and extra pay from various students for trouble shooting their online problems. Other interests/Hobbies (optional): ? Web Surfing ? Sports ? Watching Comics, News channels ? Miniature Collection ? Exploring hidden facts ? Solving riddles and puzzles
4.80+
391+ Reviews
552+ Question Solved
Related Book For
Question Posted:
Students also viewed these Corporate Finance questions
-
Suppose Caterpillar, Inc., has 665 million shares outstanding with a share price of $74.77, and $25 billion in debt. If in three years, Caterpillar has 700 million shares outstanding trading for $83...
-
A firm has 10 million shares outstanding with a market price of $20 per share. The firm has $25 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has...
-
Erwin Enterprises has 10 million shares outstanding with a current market price of $10 per share. There is one investment available to Erwin, and its cash flows are provided below. Erwin has a cost...
-
A firm makes three types of furniture: beds, chairs and tables. The manufacturing times required to make them, the profit and capacity available at each work centre are given below; To make one unit...
-
Powell owns a 20% interest in Cooke Partnership. At the beginning of 2015, Powell's basis is $22,000. Cooke reports a $90,000 operating loss in 2015, and Powell withdraws $10,000 from the...
-
Concealment investigative methods sometimes involve the study of documents that have been manipulated. (True/False)
-
How can we use packaging to structure modeling artifacts?
-
Development of a new deluxe version of a particular software product is being considered by Ravi Beharas software house. The activities necessary for the completion of this project are listed in the...
-
The UPS Strike of 1996 Win-Lose Negotiation (case study) 1.This was a distributive negotiation. Based on in-class discussion and readings, what are the reasons that this was a distributive situation?...
-
The diagram below shows some of the forces acting on a car of mass 800 kg. a. State the size of the total drag force when the car is travelling at constant speed. b. The driving force is increased to...
-
Rogot Instruments makes fine violins, violas, and cellos. It has $1 million in debt outstanding, equity valued at $2 million, and pays corporate income tax at a rate of 35%. Its cost of equity is 12%...
-
Summit Builders has a market debt-equity ratio of 0.65 and a corporate tax rate of 40%, and it pays 7% interest on its debt. By what amount does the interest tax shield from its debt lower Summits...
-
Why would each of the following induce some members of OPEC to cheat on their cartel agreement? a. Newly joined cartel members are lessdeveloped countries. b. The number of cartel members doubles...
-
When is using magazine advertising a bad choice?
-
What is public relations, and how is it used in an IMC campaign?
-
How are coupons used to bridge the gap between newspaper and sales promotion? What are the strengths of their use?
-
What are some of the most common incentives used in direct marketing?
-
Define an infomercial and explain the differences between an infomercial and a traditional television advertisement.
-
Behavioural Finance In recent years, a new interpretation of market behaviour has emerged. Explain this theory and review what it says about Shleifers three conditions of market efficiency. Compare...
-
Write an essay describing the differing approaches of nursing leaders and managers to issues in practice. To complete this assignment, do the following: 1. Select an issue from the following list:...
-
Find the average (mean) of the exam scores in Problem 1, if each score is multiplied by 2. Data from Problem 1 Find the average (mean) of the exam scores 73, 89, 45, 82, and 66.
-
Would our goal of maximizing the value of the stock be different if we were thinking about financial management in a foreign country? Why or why not?
-
Would our goal of maximizing the value of the stock be different if we were thinking about financial management in a foreign country? Why or why not?
-
Suppose you own stock in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding...
-
Provide References In September of 2015, the EPA issued Volkswagen ( OTCPK:VLKAY ) a notice of violation of the Clean Air Act of 1963. The EPA accused the Volkswagen Group of intentionally...
-
2. Find c such that A is invertible 1 0 A= -1 -1 3 1 0 2c -4]
-
Futura Company purchases the 4 0 , 0 0 0 starters that it installs in its standard line of farm tractors from a supplier for the price of $ 8 . 4 0 per unit. Due to a reduction in output, the company...
Study smarter with the SolutionInn App