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Q6-RK Enterprises expected to have a dividend in the coming year of 8 million, and this dividend flow is expected to grow at a rate
Q6-RK Enterprises expected to have a dividend in the coming year of 8 million, and this dividend flow is expected to grow at a rate of 3% per year thereafter. RK Enterprises has an equity cost of capital of 13% a debt cost of capital of 7%, and it is in the 21% corporate tax bracket. Assume RK Enterprises maintains a .5 debt to equity ratio for the following parts of this problem. 1. Determine RK Enterprises's pre-tax WACC. (10 pts.) 2. Determine RK Enterprises's after-tax WACC. (10 pts.) 3. Determine the value RK Enterprises as a levered entity. (10 pts.) 4. Determine the value of RK Enterprises's interest tax shield. (10 pts.) Q6-RK Enterprises expected to have a dividend in the coming year of 8 million, and this dividend flow is expected to grow at a rate of 3% per year thereafter. RK Enterprises has an equity cost of capital of 13% a debt cost of capital of 7%, and it is in the 21% corporate tax bracket. Assume RK Enterprises maintains a .5 debt to equity ratio for the following parts of this problem. 1. Determine RK Enterprises's pre-tax WACC. (10 pts.) 2. Determine RK Enterprises's after-tax WACC. (10 pts.) 3. Determine the value RK Enterprises as a levered entity. (10 pts.) 4. Determine the value of RK Enterprises's interest tax shield. (10 pts.)
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