4. Hofstra Inc. exists in a perfect capital market with taxes. Its debt cost of capital...
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4. Hofstra Inc. exists in a perfect capital market with taxes. Its debt cost of capital is 6%, its equity cost of capital is 14%, its tax rate is 25%, and its weighted average cost of capital is 11%. What proportion of Hofstra Inc financed with debt? A) 20.5% B) 15% C) 31.5% D) 45% E) 70% 5. A first needs to raise 150 million, 50% through debt and 50% through equity; flotation costs are 2% for debt and 5% for equity. How much, in millions, does the firm effectively need to raise? A) 155 B) 175 C) 150 D) 167 4. Hofstra Inc. exists in a perfect capital market with taxes. Its debt cost of capital is 6%, its equity cost of capital is 14%, its tax rate is 25%, and its weighted average cost of capital is 11%. What proportion of Hofstra Inc financed with debt? A) 20.5% B) 15% C) 31.5% D) 45% E) 70% 5. A first needs to raise 150 million, 50% through debt and 50% through equity; flotation costs are 2% for debt and 5% for equity. How much, in millions, does the firm effectively need to raise? A) 155 B) 175 C) 150 D) 167
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