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Please show the formulas of how to find these answers step by step without excel spreadsheet ThreeTree Inc. has an unlevered cost of capital of
Please show the formulas of how to find these answers step by step without excel spreadsheet
ThreeTree Inc. has an unlevered cost of capital of a cost of debt of and is financed with debt. There are no corporate taxes.
What would be the firm's levered cost of equity?
A
B
C
D
E
If the firm were to change its capital structure so that it is financed with debt, what would be thenew WACC?
A
B
C
D
E
Please use the following information to answer the next TWO questions.
Farmhouse Fudge Inc. expects an EBIT of $ every year forever. The firm currently has no debt and its cost of equity is The firm is thinking of borrowing $ at and buying back shares. The corporate tax rate is
What would be the value of the levered firm?
A $
B $
C $
D $
E $
What would be the firm's cost of equity and WACC, respectively, after the recapitalization?
A;
B;
C;
D;
E;
An unlevered firm currently has a value of $ million. The firm has a tax rate of The firm wishes to replace $ million of its equity with $ million of permanent debt. However, if it increases its leverage, the PV of the expected costs of financial distress would increase from $ to $ million. What is the value of the levered firm if it goes ahead with this plan?
A $ million
B $ million
C $ million
D $ million
E None of the above.
Railwaze Corp. is currently an allequity firm with a market value of $ and a stock price of $ per share. If the firm does a for stock split, what will be the price per share after the split?
A $
B $
C $
D $
E $
Your firm's management is deciding whether to use its accumulated cash to either expand the firm's operations, which will have an NPV of $ million, or to pay out the cash in a share repurchase. If perfect capital markets hold, which option would be preferred by shareholders?
A Shareholders would prefer the repurchase since the share price will be higher.
B Shareholders would prefer the expansion since the share price will be higher.
C Shareholders would be indifferent between the two options.
D There is not enough information to answer the question.
E None of the above.
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