Genedak Hogan's WACC and Effective Tax Rate. Use the table in the popup window. Ito answer the problem Genedak Hogan (GH) is an American conglomerate that is actively debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debitato diversification Senior management at Gendak Hogan is actively debating the implications of diversification on its cost of equity All agree that the company's retums will be loss correlated with the reference market return in the future, the financial advisors believe that the market will assess an additional 335risk premium for going intornational to the basic CAPM cost of equity. Many MNEs have greator ability to control and reduce their effective tax rates when expanding international operations. Assume that Genedak Hogan was able to reduce its consolidated effective tax rate from 35 to 345 stor international diversification a. Calculate the weighted average cost of capital for Genedak Hgin before and after international diversification b. Adding the hypothetical risk premium to the cost of equity (an added 3.3% to the cost of equilty because of international diversification, what is the fem's WACC before and after international diversification? c. Il Genedak Hogan was able to reduce its consolidated affective tax rate from 39% to 34%, what would be the impact on its WACC? a. Without the hypothetical additional risk premium what is Genedak-Hogan's cost of equily before international diversification of is operations? 11.15% (Round to two decimal places) Without the hypothetical additional link premium, what is Genedak-Hogan's cost of equity after international diversification of its operations? (Round to two decimal places (Click on the icon to import the table into a spreadsheet.) Symbol Assumptions Correlation between G-H and the market Standard deviation of G-H's returns Standard deviation of market's returns Risk-free rate of interest Additional equity risk premium for internationalization Estimate of G-H's cost of debt in U.S. market Market risk premium Corporate tax rate Proportion of debt Proportion of equity om ka RPM Before Diversification 0.86 29.9% 18.9% 3.4% 0.0% 72% 5.7% 39% 3396 67% After Diversification 0.76 25.5% 18.9% 3.4% 3.3% 6.9% 5.7% 39% 27% 73% ko km-ki DIV EV Print Done Genedak Hogan's WACC and Effective Tax Rate. Use the table in the popup window. Ito answer the problem Genedak Hogan (GH) is an American conglomerate that is actively debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debitato diversification Senior management at Gendak Hogan is actively debating the implications of diversification on its cost of equity All agree that the company's retums will be loss correlated with the reference market return in the future, the financial advisors believe that the market will assess an additional 335risk premium for going intornational to the basic CAPM cost of equity. Many MNEs have greator ability to control and reduce their effective tax rates when expanding international operations. Assume that Genedak Hogan was able to reduce its consolidated effective tax rate from 35 to 345 stor international diversification a. Calculate the weighted average cost of capital for Genedak Hgin before and after international diversification b. Adding the hypothetical risk premium to the cost of equity (an added 3.3% to the cost of equilty because of international diversification, what is the fem's WACC before and after international diversification? c. Il Genedak Hogan was able to reduce its consolidated affective tax rate from 39% to 34%, what would be the impact on its WACC? a. Without the hypothetical additional risk premium what is Genedak-Hogan's cost of equily before international diversification of is operations? 11.15% (Round to two decimal places) Without the hypothetical additional link premium, what is Genedak-Hogan's cost of equity after international diversification of its operations? (Round to two decimal places (Click on the icon to import the table into a spreadsheet.) Symbol Assumptions Correlation between G-H and the market Standard deviation of G-H's returns Standard deviation of market's returns Risk-free rate of interest Additional equity risk premium for internationalization Estimate of G-H's cost of debt in U.S. market Market risk premium Corporate tax rate Proportion of debt Proportion of equity om ka RPM Before Diversification 0.86 29.9% 18.9% 3.4% 0.0% 72% 5.7% 39% 3396 67% After Diversification 0.76 25.5% 18.9% 3.4% 3.3% 6.9% 5.7% 39% 27% 73% ko km-ki DIV EV Print Done
