Question 2 5 pl Your firm has just opened for business and that It was orlginally funded with Investor-supplied capital equal to $30,000,000: $12,000,000 by creditors who required an 8 percent before-tax rate of return (4.8 percent after-taxd; and $18,000,000 by stockholders who required a 15 percent rate of return. For all future years, the firm expects to make no additional Investments in assets, depreclation is zero, and the firm's operations will produce sales of $40.000,000 and EBIT of As demonstrated in class, and assuming that the WACC remains constant and that the before-tax cost of debt remains constant, determine what the new cost of equity must be. 17.90% 16.66% 17.55% @ 16.95% 17.24% Question 3 5 pts A firm has a debt/equity ratio of 0.40 and a tax rate of 40.0 percent. Its equity beta Is 1.20, whille Its asset (unlevered) beta Is 0.9677. Given a risk-free rate of 5.0 percent and a retuni on the market of 10.0 percent, the equity has a required rate of return of 11.00 percent. As you can calculate, 45.45% of the Investors' required rate of return comes from the risk-free rate (compensates the investor for the time value of money). As we discussed In class, the Investor Is also compensated for business risk and financial risk. Glven this information, determine what percentage of the Investors total required rate of return is compensation for business risk. 41.96% 43.99% 48.46% 40.11% 46.08% D Question 4 5 pis A firm has Sales of $25,000,000, total assets of $22,500,000, current assets of $8,000,000, spontaneous liabilities of $5,000,000, a profit margin of 5 percent, a tax rate of 40%, and a dividend payout rate of 20 percent. Sales are expected to Increase to $28,000,000 for the coming year, and the firm will need to increase its fixed assets at this level of sales (that is, fixed assets will increase proportionately with sales). Given this information, and using the equation approach, determine the additional funds needed for the coming year $1,010,000 $920,000 $980,000 $950,000 $1,040,000