Which of the following statements are true? OCalifornia Corp has relied on equitý to finance its assets more than Indiana Corp has OCalifornia Corp has a lower return on equity than Indiana Corp California Corp has a higher return on equity than Indiana Corp California Corp generates more sales for every dollar of assets than does Indiana Corp
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- The Rivoli Company has no debt outstanding, and its financial position is given by the following data: What is Rivoli’s intrinsic value of operations (i.e., its unlevered value)? What is its intrinsic stock price? Its earnings per share? Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rs, will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, rd, of 7%. Based on the new capital structure, what is the new weighted average cost of capital? What is the levered value of the firm? What is the amount of debt? Based on the new capital structure, what is the new stock price? What is the remaining number of shares? What is the new earnings per share?As an Analyst you were tasked to compute for the Weighted Average Cost of Capital of variouscompanies given the following information. Income tax rate is 25% a. What is the cost of equity of each companies?b. What is the after tax cost of debt of each companies?c. What is the WACC of each companies? W Corp A Corp Co. Corp Ca Corp Risk Free rate 4.00% 3.00% 2.00% 3.50% Beta 1.25 % 1.50% 1.30% 1.40% Market Return 12.00% 11.00 % 10:00% 8:00% Debt to Equity Ratio 2.5 3 4 3.5 Credit Spread om BPS 200 300 250 150Suppose Goodyear Tire and Rubber Company has an equity cost of capital of 7.9%, a debt cost of capital of 6.4%, a marginal corporate tax rate of 21%, and a debt-equity ratio of 2.7. Assume that Goodyear maintains a constant debt-equity ratio. a. What is Goodyear's WACC? b. What is Goodyear's unlevered cost of capital? c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC. a. What is Goodyear's WACC? The WACC is %. (Round to two decimal places.)
- An unlevered firm, U, operates in a perfect market and has a net operating income of GHC250,000.00 and required rate of return on assets for firms in the industry is 12.5%. The firm issues GHC1,000,000.00 worth of debt with a required return of 5% and uses the proceeds to repurchase outstanding shares. The firm U operates in a perfect market without corporate or personal taxes. Required: 1.Estimate the market value and required return of th firm’s shares before the repurchase transaction 2. Estimate the market value and required return of the firm’s remaining shares after the repurchase transactionThe activity ratios measure which of the following? Select one: O a the efficiency of the company's supply chain O b. the efficiency with which a company generates sales from its assets Oc the profitability of the company's activities Od the production efficiency of a company's fixed assets If the assumption of financial distress costs is added, then Modigliani and Miller (with taxes) predicts that the optimal capital structure is 100% debt Select one: O True O FalseSuppose Goodyear Tire and Rubber Company has an equity cost of capital of 8.6%, a debt cost of capital of 7.1%, a marginal corporate tax rate of 24%, and a debt-equity ratio of 2.5. Assume that Goodyear maintains a constant debt-equity ratio. a. What is Goodyear's WACC? b. What is Goodyear's unlevered cost of capital? c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC. Question content area bottom Part 1 a. What is Goodyear's WACC? The WACC is enter your response here%. (Round to two decimal places.)
- The Rivoli Company has no debt outstanding, and its financial position is given by the following data Expected EBIT Growth rate in EBIT, GL Cost of equity, rs Shares outstanding, no Tax rate, T (federal-plus-state) a. What is Rivoli's intrinsic value of operations (i.e., its unlevered value)? Round your answer to the nearest dollar. $ 6,000,000 What is its intrinsic stock price? Its earnings per share? Round your answers to the nearest cent. Intrinsic stock price: $ Earnings per share: $ 3 b. Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 35% debt based on market values, its cost of equity, rs, will increase to 11% to reflect the increased risk. Bonds can be sold at a cost, rd, of 8%. Based on the new capital structure, what is the new weighted average cost of capital? Round your answer to three decimal places. × % $ 30 $800,000 0% 10% 200,000 25% ✔ What is the levered value of the firm? What is the amount…Suppose Goodyear Tire and Rubber Company has an equity cost of capital of 8.1%, a debt cost of capital of 6.6%, a marginal corporate tax rate of 22%, and a debt-equity ratio of 2.5. Assume that Goodyear maintains a constant debt-equity ratio. a. What is Goodyear's WACC? b. What is Goodyear's unlevered cost of capital? c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC. Question content area bottom a. What is Goodyear's WACC? The WACC is enter your response here%. (Round to two decimal places.)Calculating WACC Brown Industries has a debt-equity ratio of 1.5. Its WACC is 9.6 percent, and its cost of debt is 5.7 percent. There is no corporate tax. a. What is the company's cost of equity capital? b. What would the cost of equity be if the debt-equity ratio were 2.0? What if it were .5? What if it were zero?
- Company ABC is looking to figure out its cost of equity. The company operates in the construction business where, based on a list of comparable firms, the average beta is 0.9. The comparable firms have an average debt-to-equity ratio of 0.5. Company ABC has a debt-to-equity ratio of 0.25 and a 30% tax rate. What is the ABC's Beta? O a. 0.67 O b. 0.9 OC 0.79 O d. 0.25You are analyzing the leverage of two firms and you noted the following (all values in millions of dollars) Debt Book Equity Market Equity Operating Income Interest Expense Firm A 65 75 80 45 12 Firm B 60 40 50 22 10 Which firm will be in a better position to provide a better interest cover? a. Firm A will better because its coverage ratio is 2.2 b. Both firms are equal in providing adequate interest coverage. c. Firm B will be better because its interest cover ratio is lower than that of firm A d. Firm A is better because it coverage ratio is higher (3.75) compared to firm BCompany X is competing with company Y. These are their ratios: x y Debt Ratio = .437 Debt Ratio = .599 Debt Equity Ratio = .453 Debt Equity Ratio = .965 Interest Earned = 15.854 Interest Earned = 5.67 Based on Long-Term Debt paying ability, are any of them doing well? which company is doing better?
