You are given the following information about The Midnight Cheers Inc.: This company can borrow...
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You are given the following information about The Midnight Cheers Inc.: • This company can borrow money by selling corporate bonds. If it does so, the interest rate on this debt will be 7 %. . Right now, though, it does not have any bonds. It is all-equity and the annual cost of capital equals 14 %. • It expects to be receiving $155,000 in annual EBIT forever. • Its corporate income is taxed each year at 23% tax rate. a. Assume that this company borrowed $198,000 and used the money to buy back Its common stock shares. In this case, the company's cost of equity equals: (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Continuing part (a)- In this case, the company's weighted average cost of capital equals: (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) You are given the following information about The Midnight Cheers Inc.: • This company can borrow money by selling corporate bonds. If it does so, the interest rate on this debt will be 7 %. . Right now, though, it does not have any bonds. It is all-equity and the annual cost of capital equals 14 %. • It expects to be receiving $155,000 in annual EBIT forever. • Its corporate income is taxed each year at 23% tax rate. a. Assume that this company borrowed $198,000 and used the money to buy back Its common stock shares. In this case, the company's cost of equity equals: (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Continuing part (a)- In this case, the company's weighted average cost of capital equals: (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Posted Date:
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