Rumolt Motors has 58 million shares outstanding with a price of $26 per share. In addition, Rumolt

Question:

Rumolt Motors has 58 million shares outstanding with a price of $26 per share. In addition, Rumolt has issued bonds with a total current market value of $991 million.

Suppose Rumolt’s equity cost of capital is 14%, and its debt cost of capital is 7%.

a. What is Rumolt’s pretax WACC?

b. If Rumolt’s corporate tax rate is 30%, what is its after-tax WACC?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals Of Corporate Finance

ISBN: 9781292437156

5th Global Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

See More Books

Question Posted: Feb 21, 2024 10:00 AM

See More Questions

Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a total current market value of $150 million. Suppose Rumolts equity cost of...
Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a total current market value of $150 million. Suppose Rumolts equity cost of...
Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a total current market value of $150 million. Suppose Rumolts equity cost of...
A beam of 40-eV electrons traveling in the +x-direction passes through a slit that is parallel to the y-axis and 5.0wide. The diffraction pattern is recorded on a screen 2.5 m from the slit. (a) What...
1. If f(g(x)) and g(f(x)) both equal x, then the function g is the ________ function of the function f. 2. The inverse function of f is denoted by ________. 3. The domain of f is the ________ of f1,...
10. Which of the following does not apply in FOB shipping point? Which of the following does not apply in FOB shipping point? The buyer is responsible for paying the freight costs incurred in...
Rent on owned buildings is not included in cost accounts.
Instar Company has several investments in other companies. The following information regarding these investments is available at December 31, 2010. 1. Instar holds bonds issued by Dorsel Corp. The...
Presented below is an amortization schedule related to Flounder Company's 5-year, $170,000 bond with a 7% interest rate and a 4% yield, purchased on December 31, 2015, for $192,705. Cash Interest...
Summit Builders has a market debt-equity ratio of 1.30 and a corporate tax rate of 38%, and it pays 9% interest on its debt. By what amount does the interest tax shield from its debt lower Summits...
Rogot Instruments makes fine violins, violas, and cellos. It has $1.9 million in debt outstanding, equity valued at $2.8 million, and pays corporate income tax at a rate of 40%. Its cost of equity is...
Evaluate the sum. 2 10-* k=1
Problem 2-26 (Static) Complete the balance sheet using cash flow data LO 2-2, 2-3, 2-5, 2-6 Following is a partially completed balance sheet for Epsico Incorporated at December 31, 2022, together...
Consider the following potential events that might have occurred to Global Conglomerate on December30, 2018. For eachone, indicate which line items inGlobal's balance sheet would be affected and by...
An epidemiologist plans to conduct a survey to estimate the percentage of women who give birth. How many women must be surveyed in order to be 95% confident that the estimated percentage is in error...
Jamonit Ltd is a non-group employer which paid wages of $136,000 in the Northern Territory during March 2021. The company does not pay wages in any other state. Calculate the payroll tax payable in...
Following is a partially completed balance sheet for Epsico Inc. at December 31, 2019, together with comparative data for the year ended December 31, 2018. From the statement of cash flows for the...
It takes 45.66 mL of 0.1126 M HBr to titrate 25.00 mL of Ca(OH)2 to its equivalence point. What is the original concentration of the Ca(OH)2 solution?
On 1 July 2021, Croydon Ltd leased ten excavators for five years from Machines4U Ltd. The excavators are expected to have an economic life of 6 years, after which time they will have an expected...
The risk-free rate is 3% and you believe that the S&P 500s excess return will be 10% over the next year. If you invest in a stock with a beta of 1.2 (and a standard deviation of 30%), what is your...
You hear on the news that the S&P 500 was down 2% today relative to the risk-free rate (the markets excess return was -2%). You are thinking about your portfolio and your investments in Hewlett...
Use the data in SBUX_GOOGL.xlsx on MFL to answer the following questions: a. What is the return for SBUX over the period without including its dividends? With the dividends? b. What is the return for...
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company...
Brief Exercise 10-6 Flint Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $327,600. The estimated fair values of the assets are land $62,400, building...
"faithful respresentation" is the overriding principle that should be followed in ones prepaparation of IFRS-based financial statement. what is it? explain it fully quoting IAS. how this this...

Rumolt Motors has 58 million shares outstanding with a price of $26 per share. In addition, Rumolt

Question:

Step by Step Answer:

Rumolt Motors WACC Calculation a Pretax WACC Calculate the total market value Total market value Equ...View the full answer

Fundamentals Of Corporate Finance

Students also viewed these Business questions