Lab Finance Problem 13-14 (algorithmic) Question Help Courses Genedak-Hogan's WACC and Effective Tax Rate. Use the table in the popup window. I. to answer the problem. Genedak-Hogan (G-H) is an American ourse Home conglomerate that is actively debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debt after diversification Senior Management at Genedak-Hogan is actively debating the implications of diversification on its cost of equity. All agree that the company's returns will be less correlated with the reference market return in the future, the financial advisors believe that the market will assess an additional 3 2% risk premium for going international to the basic CAPM cost of equity Many MNEs have greater ability to control and reduce their effective tax rates when expanding international operations. Assume that Genedak-Hogan was able to reduce its consolidated effective tax rate from 42% to 38% after international assignments diversification a. Calculate the weighted average cost of capital for Gonedak-Hogan before and after international diversification Study Plan b. Adding the hypothetical risk premium to the cost of equity (an added 3.2% to the cost of equity because of international diversification), what is the firm's WACC before and after international diversification? c. If Genedak-Hogan was able to reduce its consolidated effective tax rate from 42% to 38%, what would be the impact on its WACC? Results a. Wihout the hypothetical additional risk premium, what is Genedak-Hogan's cost of equity before informational diversification of its operations? Pearson Text In (Round to two decimal places Multimedia Library Financial Calculator Chapter Resources Communication Tools Enter your answer in the answer box and then click Check Answer 8 parte remaining Clear All COCK AS sty AI Problem Genedak-Hogan's WACC and Effective Tax Rato. Use the table in the popup window, to answer the problem. Genedak-Hogan (G-H) is an American conglomerate that do thoanal The is planning on reducing consolida pst of equity. All agree that the con 0 Data Table ll assess an additional 3.2% ris Yective tax rates when expanding International diversification (Click on the loon to import the table into a spreadsheet.) a. Calculate the w b. Adding the hyp Before After firm's WACC before and after in Assumptions Symbol Diversification Diversification c. Genedak-Hog 0.87 0.69 Correlation between G-H and the market jm a. Without the hyp Standard deviation of G-H's returns 29.8% 24.9% Standard deviation of market's returns 17.2% 17.2% [% (Round tot Risk-free rate of interest ker 3.9% 3.9% Additional equity risk premium for interationalization RPM 0.0% 3.2% Estimate of G-H's cost of debt in U.S. market ko 7.4% 6.9% Market risk premium kkor 5.5% 5.5% Corporate tax rate 42% 42% Proportion of debt DIV 32% 27% ENV Proportion of equity 68% 73% brary culator Surces tion Print Done Enter your answer in the answer box and then click Check Answer Clear All Check Awe 8 parts remaining Lab Finance Problem 13-14 (algorithmic) Question Help Courses Genedak-Hogan's WACC and Effective Tax Rate. Use the table in the popup window. I. to answer the problem. Genedak-Hogan (G-H) is an American ourse Home conglomerate that is actively debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debt after diversification Senior Management at Genedak-Hogan is actively debating the implications of diversification on its cost of equity. All agree that the company's returns will be less correlated with the reference market return in the future, the financial advisors believe that the market will assess an additional 3 2% risk premium for going international to the basic CAPM cost of equity Many MNEs have greater ability to control and reduce their effective tax rates when expanding international operations. Assume that Genedak-Hogan was able to reduce its consolidated effective tax rate from 42% to 38% after international assignments diversification a. Calculate the weighted average cost of capital for Gonedak-Hogan before and after international diversification Study Plan b. Adding the hypothetical risk premium to the cost of equity (an added 3.2% to the cost of equity because of international diversification), what is the firm's WACC before and after international diversification? c. If Genedak-Hogan was able to reduce its consolidated effective tax rate from 42% to 38%, what would be the impact on its WACC? Results a. Wihout the hypothetical additional risk premium, what is Genedak-Hogan's cost of equity before informational diversification of its operations? Pearson Text In (Round to two decimal places Multimedia Library Financial Calculator Chapter Resources Communication Tools Enter your answer in the answer box and then click Check Answer 8 parte remaining Clear All COCK AS sty AI Problem Genedak-Hogan's WACC and Effective Tax Rato. Use the table in the popup window, to answer the problem. Genedak-Hogan (G-H) is an American conglomerate that do thoanal The is planning on reducing consolida pst of equity. All agree that the con 0 Data Table ll assess an additional 3.2% ris Yective tax rates when expanding International diversification (Click on the loon to import the table into a spreadsheet.) a. Calculate the w b. Adding the hyp Before After firm's WACC before and after in Assumptions Symbol Diversification Diversification c. Genedak-Hog 0.87 0.69 Correlation between G-H and the market jm a. Without the hyp Standard deviation of G-H's returns 29.8% 24.9% Standard deviation of market's returns 17.2% 17.2% [% (Round tot Risk-free rate of interest ker 3.9% 3.9% Additional equity risk premium for interationalization RPM 0.0% 3.2% Estimate of G-H's cost of debt in U.S. market ko 7.4% 6.9% Market risk premium kkor 5.5% 5.5% Corporate tax rate 42% 42% Proportion of debt DIV 32% 27% ENV Proportion of equity 68% 73% brary culator Surces tion Print Done Enter your answer in the answer box and then click Check Answer Clear All Check Awe 8 parts remaining