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

Question

1 Approved Answer

XYZ, Inc. is considered as being above average risk and so its market equity beta is 1.8. Currently, the default free rate on long term

XYZ, Inc. is considered as being above average risk and so its market equity beta is 1.8. Currently, the default free rate on long term govt. securities is 4% and the market risk premium is 9%. Furthermore, XYZ has $2 million of interest bearing debt outstanding and the market value of equity is estimated at $3 million. Its after tax cost of debt is 8%. Calculate XYZ's WACC.

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

Finance

Finance

Authors: Ehsan Nikbakht, A A Groppelli

6th Edition

0764147595, 9780764147593

More Books

Students also viewed these Finance questions

Question

★★★★★
Suppose that a linear programming problem has 20 functional constraints in inequality form such that their right-hand sides (the bi) are uncertain parameters, so chance constraints with some a are...

Answered: 1 week ago

Question

★★★★★
(a) Should Jim Weston have spoken up in defense of Washington during the meeting? If you were Weston, would you have taken Washingtons side against the other seven members? (b) Would your answer be...

Answered: 1 week ago

Question

★★★★★
What is the general rule for identifying points to be investigated using the ????2 and ???? model diagnostics?

Answered: 1 week ago

Question

★★★★★
Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing...

Answered: 1 week ago

Question

★★★★★
1)Smith corporation has 250,000 shares of stock outstanding, total shareholders equity of $10 million, and stock price of $53. What is the company's market capitalization? 2) Crazy Corpration has a...

Answered: 1 week ago

Question

★★★★★
During what stages do Total Rewards impact the employee life cycle? 1 point At each phase of the life cycle During the attracting and selection phase of the life cycle During the separating phas

Answered: 1 week ago

Question

★★★★★
Part 3 of 5 - Game Theory Battle Between Two Chip Firms The following is a classic normal form game that depicts the pricing rivalry between Intel and AMD for their newest top-oftheline microchip....

Answered: 1 week ago

Question

★★★★★
Service providers (airlines, hotels, restaurants, visitor attractions) in the tourism industry, need to maintain a high capacity, in order to meet their overheads. The term "capacity" refers to the...

Answered: 1 week ago

Question

★★★★★
In a small town, two restaurants compete in the market for pizza. Each restaurant must decide whether to advertise or not. The potential monthly profits for these firms are shown below (in thousands...

Answered: 1 week ago

Question

★★★★★
Figure 13.4 shows the effect of an increase in the world interest rate on a small open economy with perfect capital mobility. We assumed there that the Net Capital Outow (NCO) was positive. For most...

Answered: 1 week ago

Question

★★★★★
1. Kelvin has $12,000 in outstanding student loans. Which of the following criteria should Kelvin fulfill to be eligible for the Public Service Loan Forgiveness (PSLF) program? He should be a...

Answered: 1 week ago

Question

★★★★★
1. Discuss the following statements: a) When the cause is identified, the effect has always occurred already. b) Predictions made with hindsight are almost always correct.

Answered: 1 week ago

Question

★★★★★
2. Take a familiar problem as your starting point. What are the main elements of the problem? Discuss whether you all agree on the choice of main elements.

Answered: 1 week ago

Question

★★★★★
2. In this chapter, the reader should reflect on the following concepts: Context, winwin, win-lose, ambiguity, mental model, point of reference.

Answered: 1 week ago

Previous Question Next Question