Beta Ltd operates a quite successful chain of milk products and tea houses across South East...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Beta Ltd operates a quite successful chain of milk products and tea houses across South East Asia, Beta plans to expand in South America. Therefore, Beta needs some funds for this investment. The company balance sheet in Australian Dollars(AS) is as folrows Cash Accounts receivable Inventories Net fixed assets Total assets 1,500,000 2.400,000 1,310,000 Long-term debt 2,500-000 Common Equity [7,710,000 Total Debt and Equity 4,000,000 3,710,000 7710,000 Nowadays the company's common equity is selling for a price equal to 2 times its book value and the firm's investors require a 10 percent return. The firm's bonds command a yield to maturity of 6 percent, and the firm faces a tax rate of 30 percent. At the end of the previous year Beta's bonds were trading near par value. What is the company's weighted average-eastotrapital?.(15 marks) b. Assume the following and determine what the firm's weighted average cost of capital is: a. Beta's stock price rises such that it is sold at 3.5 timeș its book value and the required rate increased to 15 per cent, and The market value of the bonds are 1.25 times their book value and yield to maturity is 8 percent. (15 marks) Beta Ltd operates a quite successful chain of milk products and tea houses across South East Asia, Beta plans to expand in South America. Therefore, Beta needs some funds for this investment. The company balance sheet in Australian Dollars(AS) is as folrows Cash Accounts receivable Inventories Net fixed assets Total assets 1,500,000 2.400,000 1,310,000 Long-term debt 2,500-000 Common Equity [7,710,000 Total Debt and Equity 4,000,000 3,710,000 7710,000 Nowadays the company's common equity is selling for a price equal to 2 times its book value and the firm's investors require a 10 percent return. The firm's bonds command a yield to maturity of 6 percent, and the firm faces a tax rate of 30 percent. At the end of the previous year Beta's bonds were trading near par value. What is the company's weighted average-eastotrapital?.(15 marks) b. Assume the following and determine what the firm's weighted average cost of capital is: a. Beta's stock price rises such that it is sold at 3.5 timeș its book value and the required rate increased to 15 per cent, and The market value of the bonds are 1.25 times their book value and yield to maturity is 8 percent. (15 marks)
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
The Rapscallion Companys stock is selling for $43.75. Dave Jones has done some research on the firm and its industry, and he thinks it will pay dividends of $5 next year and $7 the following year....
-
A companys stock is selling for $4. The company has no outstanding debt. Analysts consider the liquidation value of the company to be at least $300,000 and there are 100,000 shares outstanding. What...
-
The Pepperpot Companys stock is selling for $52. Its last dividend was $4.50, and the firm is expected to grow at 7% indefinitely. Flotation costs associated with the sale of common stock are 10% of...
-
Regulation imperial soccer fields have a length of 91 meters and a width of 39 meters. Show that during a friendly match there are always two players that are not farther from each other than 19...
-
Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, arranged a meeting with Leroy Gee, the chief accountant of a large, local competitor. The two are lifelong...
-
(Hard) Prove that propositional logic and first-order predicate logic are sound and complete.
-
What electronic information is discoverable?
-
Selected accounts for Kebby Photography at December 31, 2018, follow: Requirements 1. Journalize Kebby Photography's closing entries at December 31, 2018. 2. Determine Kebby Photography's ending...
-
1)Today is April 16, 2020. You bought a futures contract on corn for December 2020 delivery. The price is $3.51 per bushel. The contract size is 5,000 bushels.You are required to establish a margin...
-
Refer to Simon Company's balance sheets in Exercise 13-6. Simon Company's year-end balance sheets follow. Express the balance sheets in common-size percents. Round amounts to the nearest one-tenth of...
-
a. Benefits for employees are forms of payment other than a salary or hourly wage. The following are just a few examples of specific employee benefits: paid time off, health insurance, tuition...
-
Find the future value of an ordinary annuity of $9,000 paid quarterly for 5 years, if the interest rate is 7%, compounded quarterly..(Round your answer to the nearest cent.) Need Help? Read It Master...
-
Northampton City Tours (NCT) offers personalized historical and architectural tours in a large midwestern city and the local suburbs. NCT charges $372.00 per trip to or from the airport. The variable...
-
Find the equation of the line given the following conditions. 4. Slope = 2, passing through (3,5) 5. Slope, passing through (6,-2)
-
Crane Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 51,500 timers,...
-
Multiproduct CVP Analysis (LO 3-4) Georgeland Cycles makes and sells two models of electric bicycles. The Commuter (a folding model) sells for $2,501.00 and the Tour-X (a fat-tire trail model) sells...
-
Use the information below to answer the following questions. U.S. $ CURRENCY PER U.S. EQUIVALENT $ Polish Zloty .2981 3.3546 Euro 1.2243 .8168 Mexican Peso .0752 13.2985 Swiss Franc 1.0204 .9800...
-
2. Assume a person bends forward to lift a load "with his back" as shown in Figure P12.42a. The person's spine piv- ots mainly at the fifth lumbar vertebra, with the principal supporting force...
-
A corporate treasurer is designing a hedging program involving foreign currency options. What are the pros and cons of using (a) The NASDAQ OMX (b) The over-the-counter market for trading?
-
Use the DerivaGem Application Builder functions to reproduce Table 17.2. (Note that in Table 17.2 the stock position is rounded to the nearest 100 shares.) Calculate the gamma and theta of the...
-
Suppose that the nine-month LIBOR interest rate is 8% per annum and the six-month LIBOR interest rate is 7.5% per annum (both with actual/365 and continuous compounding). Estimate the three-month...
-
The assumptions are as follows: Company A records an uncertain tax liability of \($50\) million as of the reporting date. Company A expects to settle the amount in the fourth quarter of the...
-
Find the P-value for the following values of the test statistic t, sample size n, and alternate hypothesis H1. If you use Table A.3, you may specify that P is between two values. a. t = 2.584, n =...
-
A company is computing intraperiod tax allocation for the current year and has accumulated the following income and loss items: The tax rate for the current year is 21%. Tax credits of $100,000 are...
Study smarter with the SolutionInn App