FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Show the works also 4. A firm has free cash flow of 3,500,000 USD. When the firm was unlevered it had a cost of equity

image text in transcribed

Show the works also

image text in transcribed
4. A firm has free cash flow of 3,500,000 USD. When the firm was unlevered it had a cost of equity of 9%. Then it went for permanent leverage by borrowing 500,000 USD at 8% interest rate. Corporate tax rate 40%. What is the WACC of the company? If FCF increase to 4 million next year, what will be the value of the company? (4+2=6)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Exchange Rates and International Finance

Exchange Rates and International Finance

Authors: Laurence Copeland

6th edition

273786040, 978-0273786047

More Books

Students also viewed these Finance questions

Question

★★★★★
Interest on Zeroes Snowflake Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon bonds to raise the money. The required return on the bonds...

Answered: 1 week ago

Question

★★★★★
Consider the device for the magnetic levitation of a steel ball. Obtain a design that will provide a stable response where the ball will remain within 10% of its desired position. Assume that y and...

Answered: 1 week ago

Question

★★★★★
What is a budget? (p. 314)

Answered: 1 week ago

Question

★★★★★
A corporation with $7 million in annual taxable income is considering two alternatives: Before-Tax Cash Flow Year Alt. 1 Alt. 2 0 -$10,000 -$20,000 1-10 4,500 4,500 11-20 0 4,500 Both alternatives...

Answered: 1 week ago

Question

★★★★★
On December 31, 2023, Berclair Incorporated had 460 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. - On March 1, 2024,...

Answered: 1 week ago

Question

★★★★★
1. There is no risk in a world of certainty. a. True b. False 2. Realized returns frequently differ from expected returns. a. True b. False 3. The standard deviation measures an asset's expected...

Answered: 1 week ago

Question

★★★★★
A company that uses job order costing reports the following information for March. Overhead is applied at the rate of 60% of direct materials cost. The company has no beginning Work in Process or...

Answered: 1 week ago

Question

★★★★★
Jail and Sail: Alcatraz Tour and Cruise Contribution Income Statement Sales For the Month of July Less variable costs: Admission fees Overhead Hors d'oeuvres Selling and administrative Contribution...

Answered: 1 week ago

Question

★★★★★
Troy and Kristy Reynolds (both currently age 56) have determined that they will require retirement income equal to $93,000 in today's dollars, based on their current income. They plan to retire in...

Answered: 1 week ago

Question

★★★★★
3. The Roz trust received taxable income of $20,000 and $10,000 of tax-exempt interest. The trustee paid fiduciary fees of $6,000 and a charitable contribution, as authorized by the trust agreement,...

Answered: 1 week ago

Question

★★★★★
5) If liabilities increase $120,000 during a given period and shareholders' equity decreases $25,000 during the same period, assets must: A) decrease $145,000 B) increase $145,000 C) increase $95,000...

Answered: 1 week ago

Question

★★★★★
I need help with the "Red Hat Canada - Bridging the gender gap" Case study.

Answered: 1 week ago

Question

★★★★★
A The ledger balances of Tick Tick Ltd at 31 March 2014 were as follows: A capital reduction scheme has been sanctioned under which the 250,000 preference shares are to be reduced to 80 peach, fully...

Answered: 1 week ago

Question

★★★★★
The chief accountant of Uncertain Ltd is not sure of the appropriate accounting treatment for a number of events occurring during the year 2012/13. (i) A significant number of employees have been...

Answered: 1 week ago

Question

★★★★★
From the following selected balances of Borough plc as at 31 December 2014, prepare (i) a detailed income statement for the year ended 31 December 2014 for internal use and (ii) an income statement...

Answered: 1 week ago

Previous Question Next Question