QUESTION 1

1. Acme Tool is an all-equity firm (i.e. it has no debt financing) with abeta of 1.25.If the risk-free rate is 4.5% and themarket risk premiumis 9% (the expected return in the market is 13.5%), what is the cost of equity capital for Acme Tool.

10 points

QUESTION 2

1. Sylvester's Plumbing is an all-equity firm with abeta of 1.3.If the risk-free rate is 2.75% and theexpected market returnis 13.5%, what is the cost of equity capital forSylvester's Plumbing?

10 points

QUESTION 3

1. WEC Supply is an all-equity firm (i.e. it has no debt financing) witha beta of 1.4.If the risk-free rate is 3.0% and theexpected market returnis 12.5%, what is the cost of equity capital forWEC Supply?

10 points

QUESTION 4

1. Roadrunner Bearing Company is an all-equity firm (i.e. it has no debt financing) with abeta of 1.6.If the risk-free rate is 2.5% and themarket risk premiumis 10%, what is the cost of equity capital forRoadrunner Bearing Company?

10 points

QUESTION 5

1. Apex Online has a beta of 1.4 and has a capital structure of 35% Debt and 65% Equity.The expected return on the market is 13.0% and the risk-free rate is 5.0%.Apex can borrow additional funds at the current market interest rate of 8%.The corporate tax rate for Apex is 36%.
2. Calculate Apex's cost of equity.

10 points

QUESTION 6

1. Apex Online has a beta of 1.4 and has a capital structure of 35% Debt and 65% Equity.The expected return on the market is 13.0% and the risk-free rate is 5.0%.Apex can borrow additional funds at the current market interest rate of 8%.The corporate tax rate for Apex is 36%.
2. Calculate Apex's after-tax cost of debt

10 points

QUESTION 7

1. Apex Online has a beta of 1.4 and has a capital structure of 35% Debt and 65% Equity.The expected return on the market is 13.0% and the risk-free rate is 5.0%.Apex can borrow additional funds at the current market interest rate of 8%.The corporate tax rate for Apex is 36%.
2. Calculate Apex's weighted average cost of capital

10 points

QUESTION 8

1. Calculate the weighted average cost of capital for Allied Power Products given the following information:

Market Value of Debt $800,000

Market Value of Stock $1,000,000

Current Yield rate of Debt 7.5%

Risk-free Rate 4.0%

Expected Market Return 14.2%

Beta for Allied Power 1.4

Corporate Income Tax Rate 34.0%

15 points

QUESTION 9

1. Calculate the weighted average cost of capital for AMCOM Services given the following information:

Market Value of Stock $25,000,000

Market Value of Debt $15,000,000

Cost of Equity 18.0%

Cost of Debt 9.5%

Corporate Income Tax Rate 34.0%