Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders.

Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders. See the information below:

  • A 7.5% percent annual coupon bond with 20 years to maturity, selling for 104 percent of par. The bonds make semiannual payments. What is the before tax cost of debt? If the tax rate is 40%, what is the after-tax cost of debt?
  • The firms beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?

12/31/2018 12/31/2017 12/31/2016 12/31/2015
Current Assets
Cash And Cash Equivalents 8,719,000 10,607,000 9,157,000 9,095,000
Short Term Investments 270,000 8,897,000 6,966,000 2,912,000
Net Receivables 7,140,000 7,021,000 6,693,000 6,436,000
Inventory 3,126,000 2,944,000 2,722,000 2,719,000
Other Current Assets 2,042,000 43,000 31,000 730,000
Total Current Assets 21,297,000 29,512,000 25,569,000 21,892,000
Long Term Investments 2,407,000 2,039,000 1,949,000 2,310,000
Property Plant and Equipment 17,587,000 17,237,000 16,590,000 16,316,000
Goodwill 14,806,000 14,741,000 14,429,000 14,176,000
Intangible Assets 15,823,000 13,835,000 13,432,000 13,080,000
Other Assets 5,122,000 910,000 635,000 749,000
Total Assets 77,042,000 78,274,000 72,604,000 68,523,000
Current Liabilities
Accounts Payable 7,211,000 6,724,000 6,157,000 5,545,000
Short/Current Long Term Debt 3,951,000 4,017,000 4,400,000 3,108,000
Other Current Liabilities 6,601,000 4,112,000 3,870,000 3,882,000
Total Current Liabilities 17,763,000 14,853,000 14,427,000 12,535,000
Long Term Debt 28,293,000 33,793,000 30,052,000 29,591,000
Other Liabilities 12,611,000 14,522,000 11,102,000 10,466,000
Total Liabilities 58,667,000 63,168,000 55,581,000 52,592,000
Stockholders' Equity
Total Stockholder Equity 18,375,000 15,106,000 17,023,000 15,931,000

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

Forecasting Principles And Practice

Authors: Rob J Hyndman, George Athanasopoulos

1st Edition

0987507109, 978-0987507105

More Books

Students also viewed these Finance questions