. Data about a company and the financial markets are given below. All rates are effective...

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. Data about a company and the financial markets are given below. All rates are effective annual rates. Assume a classical tax system. The company has 1 million shares. The firm's earnings were $2 million last year and the equity trades at a 15 times price-to-earnings ratio (backward-looking). The beta of the company's equity is 1.25. The company is also funded by 0.5 million 3-year bonds which it just issued. Each has a $100 face value, a 4% pa yield maturity and a 4% pa coupon rate, paid annually. The corporate tax rate is 30%. 10 year government bonds yield 2% pa and pay coupons of 1% pa. . The market risk premium (MRP) is 6% pa. Provide all answers as decimals rounded to at least 6 decimal places. Question 1a (4 marks): Calculate the firm's required return on equity (rE). Give your answer as a decimal that's correct to 6 decimal places or more. So for example if your answer is 1.23456789%, you can write 0.0123456789. Answers: Question 1b (4 marks): Calculate the firm's debt-to-assets ratio. Give your answer as a decimal that's correct to 6 decimal places or more. So for example if your answer is 1.23456789%, you can write 0.0123456789. Answers: Question 1c (3 marks): Calculate the company's after-tax WACC. Give your answer as a decimal that's correct to 6 decimal places or more. So for example if your answer is 1.23456789%, you can write 0.0123456789. Answers: . Data about a company and the financial markets are given below. All rates are effective annual rates. Assume a classical tax system. The company has 1 million shares. The firm's earnings were $2 million last year and the equity trades at a 15 times price-to-earnings ratio (backward-looking). The beta of the company's equity is 1.25. The company is also funded by 0.5 million 3-year bonds which it just issued. Each has a $100 face value, a 4% pa yield maturity and a 4% pa coupon rate, paid annually. The corporate tax rate is 30%. 10 year government bonds yield 2% pa and pay coupons of 1% pa. . The market risk premium (MRP) is 6% pa. Provide all answers as decimals rounded to at least 6 decimal places. Question 1a (4 marks): Calculate the firm's required return on equity (rE). Give your answer as a decimal that's correct to 6 decimal places or more. So for example if your answer is 1.23456789%, you can write 0.0123456789. Answers: Question 1b (4 marks): Calculate the firm's debt-to-assets ratio. Give your answer as a decimal that's correct to 6 decimal places or more. So for example if your answer is 1.23456789%, you can write 0.0123456789. Answers: Question 1c (3 marks): Calculate the company's after-tax WACC. Give your answer as a decimal that's correct to 6 decimal places or more. So for example if your answer is 1.23456789%, you can write 0.0123456789. Answers:

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1a Required return on Equity Risk Free Rate Beta x MRP Required ret... View the full answer