7. 8. Your firm maintains a no debt policy. Its equity beta is 1.0 and its...

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7. 8. Your firm maintains a no debt policy. Its equity beta is 1.0 and its tax rate is 40%. Assuming a risk-free rate of 3% and a market-risk premium of 6%, what is its WACC? To prepare a capital budgeting committee meeting, you must estimate the firm's WACC. The firm has a 25% target Net-Debt-to-Equity market leverage ratio under which the costs of debt and equity are 4% and 8%. The corporate tax rate is 40%. What is its WACC? Firm B, a bike manufacturer, has 20 million shares trading at $40.0. The book value of its interest-bearing debt is $390m, $100m in cash, and its equity's book value is $500m. Its debt's rating is AA, its interest rate is 4.8% and the yield-to-maturity (YTM) of AA-rated bonds is about 7.5%. Its equity beta is 1.5 and the corporate tax rate is 35%. The YTM of long-term government bonds is 2% and the market risk premium currently used is 6%. Firm B has a bike project costing $50m and yielding a free cash flow of $3.5m per year forever. a. b. C. What is Burgundy's weighted-average cost of capital? What is the project's opportunity cost of capital? What is the project's NPV? 7. 8. Your firm maintains a no debt policy. Its equity beta is 1.0 and its tax rate is 40%. Assuming a risk-free rate of 3% and a market-risk premium of 6%, what is its WACC? To prepare a capital budgeting committee meeting, you must estimate the firm's WACC. The firm has a 25% target Net-Debt-to-Equity market leverage ratio under which the costs of debt and equity are 4% and 8%. The corporate tax rate is 40%. What is its WACC? Firm B, a bike manufacturer, has 20 million shares trading at $40.0. The book value of its interest-bearing debt is $390m, $100m in cash, and its equity's book value is $500m. Its debt's rating is AA, its interest rate is 4.8% and the yield-to-maturity (YTM) of AA-rated bonds is about 7.5%. Its equity beta is 1.5 and the corporate tax rate is 35%. The YTM of long-term government bonds is 2% and the market risk premium currently used is 6%. Firm B has a bike project costing $50m and yielding a free cash flow of $3.5m per year forever. a. b. C. What is Burgundy's weighted-average cost of capital? What is the project's opportunity cost of capital? What is the project's NPV?

Answer rating: 100% (QA)

Lets calculate the WACC and projects opportunity cost of capital for each firm 7 Firm with No Debt Policy Given information Equity Beta e 10 RiskFree ... View the full answer