1.

Application Problem Set 6 - Quiz

Caballos, Inc., has a debt to capital ratio of 12%, a beta of 1.97 and a pre-tax cost of debt of 7.2%. The firm had earnings before interest and taxes of $ 533 million for the last fiscal year, after depreciation charges of $ 272 million. The firm had capital expenditures of $ 329 million, and non-cash working capital increased by $ 40 million. The firm also had a book value of capital of $ 1.5 billion at the beginning of the last fiscal year. (The treasury bond rate is 4.8 %, the market risk premium is 5.6 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.Estimate the Cost of Capital. Answer format is the 4 decimal places (0.1234)2.

Caballos, Inc., has a debt to capital ratio of 25%, a beta of 0.95 and a pre-tax cost of debt of 7.5%. The firm had earnings before interest and taxes of $ 643 million for the last fiscal year, after depreciation charges of $ 256 million. The firm had capital expenditures of $ 349 million, and non-cash working capital increased by $ 72 million. The firm also had a book value of capital of $ 1.7 billion at the beginning of the last fiscal year. (The treasury bond rate is 3.1 %, the market risk premium is 7 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.Estimate the Reinvestment Rate.

3.

Caballos, Inc., has a debt to capital ratio of 41%, a beta of 1.97 and a pre-tax cost of debt of 5.8%. The firm had earnings before interest and taxes of $ 588 million for the last fiscal year, after depreciation charges of $ 238 million. The firm had capital expenditures of $ 318 million, and non-cash working capital increased by $ 32 million. The firm also had a book value of capital of $ 1.3 billion at the beginning of the last fiscal year. (The treasury bond rate is 3.5 %, the market risk premium is 5.1 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.Estimate the Return on Capital.

Answer format is to 4 decimal places (0.1234).

4.

Application Problem Set 6 - Quiz Caballos, Inc., has a debt to capital ratio of 10%, a beta of 0.88 and a pre-tax cost of debt of 7.1%. The firm had earnings before interest and taxes of $ 583 million for the last fiscal year, after depreciation charges of $ 283 million. The firm had capital expenditures of $ 374 million, and non-cash working capital increased by $ 68 million. The firm also had a book value of capital of $ 1.3 billion at the beginning of the last fiscal year. (The treasury bond rate is 3.4 %, the market risk premium is 6.3 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.Estimate the Cost of Equity. Answer format is the 2 decimal places (12.34).

5.

Caballos, Inc., has a debt to capital ratio of 30%, a beta of 1.57 and a pre-tax cost of debt of 7.5%. The firm had earnings before interest and taxes of $ 600 million for the last fiscal year, after depreciation charges of $ 296 million. The firm had capital expenditures of $ 378 million, and non-cash working capital increased by $ 49 million. The firm also had a book value of capital of $ 2.07 billion at the beginning of the last fiscal year. (The treasury bond rate is 4.98 %, the market risk premium is 6.28 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.Estimate the Value of the Firm.

Answer format is the 0 decimal places (1234). 6.

Application Problem Set 6 - Quiz Caballos, Inc., has a debt to capital ratio of 22%, a beta of 1.23 and a pre-tax cost of debt of 5.2%. The firm had earnings before interest and taxes of $ 592 million for the last fiscal year, after depreciation charges of $ 289 million. The firm had capital expenditures of $ 309 million, and non-cash working capital increased by $ 31 million. The firm also had a book value of capital of $ 1.8 billion at the beginning of the last fiscal year. (The treasury bond rate is 3.7 %, the market risk premium is 5.9 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.Estimate the Expected Growth Rate. Answer format in 4 decimal places (0.1234).