Which of the following are ways that a firm can reduce cash rows in order to prevent managers from wastefully spending excess cash flows? Check that apply. Funneling excess cash flows back to shareholders through stock repurchases Minimizing the amount of debt in the firm's capital structure so that the firm can borrow money at a reasonable rate when good investment opportunities arise Increasing the amount of debt in the firm's target capital structure in the hope that higher debt-service requirements will force managers to be more disciplined Funneling excess cash flows back to shareholders through higher dividends Blue Ram Brewing Company currently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity. The firm's unlevered betals 1.1, and its cost of equity is 11.804. Because the firm has no debt in its capital structure, its weighted average cost of capital (WACC) also equals 11.30%. The risk-free rate of interest (s) is 3%, and the market risk premium (RP) is 8%. Blue Ram's marginal tax rate is 35% Blue Ramis examining how different levels of debt wil afect its costs of debt and equity, as well its WACC. The firm has collected the financial information that follows to analyze its weighted average cost of capital (WACC). Complete the following table Cost of Equity D/Cap /Cap Ratio Ratio 0.0 10 0.2 0.8 0.4 0.6 0.6 0.4 033 02 Before- Tax Cost of Bond Debt Levered D/E Ratio Rating :) Beta (b) 0.00 0.25 A 8.45 0.67 BBB 8.99 1.577 1.50 BB 11.15 2.173 14.34 3.960 11.50% 13.232 15.616% WACC 11.80% 11.6789 12.483% 34.680 Grade R New Save & Continue Continue without saving Which of the following are ways that a firm can reduce cash rows in order to prevent managers from wastefully spending excess cash flows? Check that apply. Funneling excess cash flows back to shareholders through stock repurchases Minimizing the amount of debt in the firm's capital structure so that the firm can borrow money at a reasonable rate when good investment opportunities arise Increasing the amount of debt in the firm's target capital structure in the hope that higher debt-service requirements will force managers to be more disciplined Funneling excess cash flows back to shareholders through higher dividends Blue Ram Brewing Company currently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity. The firm's unlevered betals 1.1, and its cost of equity is 11.804. Because the firm has no debt in its capital structure, its weighted average cost of capital (WACC) also equals 11.30%. The risk-free rate of interest (s) is 3%, and the market risk premium (RP) is 8%. Blue Ram's marginal tax rate is 35% Blue Ramis examining how different levels of debt wil afect its costs of debt and equity, as well its WACC. The firm has collected the financial information that follows to analyze its weighted average cost of capital (WACC). Complete the following table Cost of Equity D/Cap /Cap Ratio Ratio 0.0 10 0.2 0.8 0.4 0.6 0.6 0.4 033 02 Before- Tax Cost of Bond Debt Levered D/E Ratio Rating :) Beta (b) 0.00 0.25 A 8.45 0.67 BBB 8.99 1.577 1.50 BB 11.15 2.173 14.34 3.960 11.50% 13.232 15.616% WACC 11.80% 11.6789 12.483% 34.680 Grade R New Save & Continue Continue without saving
