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no excell The last balance sheet of Lotus company is as follows Assets: Current Assets: 20 000 000 Long-Term Assets: 80 000 000 Total Assets:
no excell
The last balance sheet of Lotus company is as follows Assets: Current Assets: 20 000 000 Long-Term Assets: 80 000 000 Total Assets: 100 000 000 Liability and Equity Account Payables: 4 000 000 Accrued Expenses: 1 000 000 Short-Term Loan: 15 000 000 Long Term Loan: 50 000 000 Equity as Common Stock: 30 000 000 Total Liab. and Equity: 100 000 000 This firm do not have any outstanding preferred stocks. a) What is the total amount of financing used to finance the assets of this firm? (10 pts.) b) What is the weight of debt and the weight of equity (common stock) in financing the assets of that firm? (20 pts.) c) Assume that this firm has only one short term loan whose annual interest rate is 10% and only one long-term loan whose annual interest 2/2 rate is 12%. What is the cost of debt for that firm if the corporate tax rate is 20% ? (20 pts) d) This firm uses CAPM to find the cost of equity. What is the cost of equity if the annual interest rate is 10%; the expected return of index in that country (Rm) is 14% and beta of that firm is 1.2? (25 pts) e) What is WACC (cost of capital of that firm? (25 pts.) Step by Step Solution
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