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please help answer these questions about risk in the attached word doc. please also show as much work as possible so I understand how its
please help answer these questions about risk in the attached word doc. please also show as much work as possible so I understand how its solved
thanks again
1.Calculating Cost of Equity The Dybvig Corporation's common stock has a beta of 1.21. If the riskfree rate is 3.5 percent and the expected return on the market is 11 percent, what is Dybvig's cost of equity capital? 4. Calculating Cost of Debt For the firm in the previous problem, suppose the book value of the debt issue is $70 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $100 million and the bonds sell for 61 percent of par. What is the company's total book value of debt? The total market value? What is your best estimate of the aftertax cost of debt now? 7.Finding the Capital Structure Fama's Llamas has a weighted average cost of capital of 9.8 percent. The company's cost of equity is 13 percent, and its cost of debt is 6.5 percent. The tax rate is 35 percent. What is Fama's debt-equity ratio? 9.Calculating the WACC In the previous problem, suppose the company's stock has a beta of 1.2. The riskfree rate is 3.1 percent, and the market risk premium is 7 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company's WACC? 13Step by Step Solution
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