Laramie Trucking's CEO is considering a change to the company's capital structure, which currently consists of 25% debt and 75% equity. The CFO believes the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The risk-free rate, r RF, is 5.0%, the market risk premium, RP M, is 6.0%, and the firm's tax rate is 25%. Currently, the cost of equity, r s, is 11.5% as determined by the CAPM. What would be the estimated cost of equity if the firm used 60% debt? (Hint: You must first find the current beta and then the unlevered beta to solve the problem.)

Answers

Answer 1

Answer:

17.74%

Explanation:

Calculation to determine What would be the estimated cost of equity

First step is to calculate the Original beta using this formula

Original beta = (rs-rRf)/ RPM

Let plug in the formula

Original beta = 11.5%- 5%

Original beta = 6.5%/ 6%

Original beta = 1.083

Second step is to calculate original D/E using this formula

original D/E= D/A / (1-D/A)

Let plug in the formula

original D/E = .25/ (1-.25%)

original D/E = .333

Third step is to calculate Unlevered Beta using this formula

Unlevered Beta= Bu = Bl / 1+((1- Tax rate) x (D/E)

Let plug in the formula

Unlevered Beta= 1.083/1+((1-.25) x .333

(D/E) =1.083/1+(0.75*.333)

(D/E) =1.083/1+.24975

(D/E) =1.083/1.24975

(D/E)=0.87

Fourth Step is to calculate the Target D/e

Target D/e = .6/.25

Target D/e = 2.4

Fifth step is to calculate the New Beta using this formula

New Beta = bu* (1+(D/E)(1- tax rate)

Let plug in the formula

New Beta= .87 *(1+(2.4)*(.6)

New Beta= .87 *(1+1.44)

New Beta= .87 *2.44

New Beta=2.1228

Now let calculate the estimated cost of equity using this formula

rs = rRF + new beta (RPm)

Let plug in the formula

rs= 5% + 2.1228*6

rs= 17.74%

Therefore the estimated cost of equity will be 17.74%


Related Questions

Fact Pattern: Mr. Bonet, a one-third partner, had a $12,000 basis in his partnership interest. Mr. Bonet withdrew from the ABC Partnership on January 1 of the current year when the partnership had the following balance sheet: Assets Basis FMV Cash $12,000 $12,000 Accounts receivable 0 30,000 Land 24,000 27,000 $36,000 $69,000 Equities Accounts payable $ 9,000 $ 9,000 Abbot, capital 9,000 20,000 Bonet, capital 9,000 20,000 Costell, capital 9,000 20,000 $36,000 $69,000 If Mr. Bonet received $20,000 cash in a liquidating distribution, what will he report as his gain or loss

Answers

Answer:

gxjxhxnxj

Explanation:

ufkdkdjdjdjfxmfxnjfrjsnzfzxjc it fausdj

Julie and Kristen are partners in a local sporting good store. They needed $51,000 to start the
business. They invested in the ratio of 3:10 respectively. How much money did each invest?
What percent is owned by Kristen?

Answers

3eyy1ggh mi y

1uj gyrju3hxif2 2x ce I I b I 6x9

We would need to set up a ratio or proportion.
3/10=x/51000
X=15,300, Julie
51,000-15,300
35,700, Kristen
70% is owned by Kristen

What criteria should be met before a data bar can be used in a report? Check all that apply. text fields numerical field drop-down menus all are primary keys all values can be compared length depends on value in field​

Answers

Answer:

2 5 & 6 [numerical fields, all values can be compared, & length depends on value in field] are your answers.

Explanation:

Got it right on EDG21

Answer:2,5, and 6

Explanation:

Choose the behaviors that are exhibited by someone who is using critical thinking.


Tests conclusions against reasonable criteria

Thinks along a narrow track

Gathers relevant information

Assesses information gathered

Jumps to conclusions

Questions ideas and beliefs

Answers

Answer:

b c d f

Explanation:

i just did it <3

Use the drop-down menus to explain how to create a one-to-one relationship using the primary keys of two tables.
1. Open the database.
2. On the Database Tools tab, in the Relationships group, click
3. On the Relationship Tools Design tab, in the Relationships group, click
4. In the dialog box, click one of the tables to add, and click Add.
5. Click the other table to add, click Add, and click
6. Click and drag the primary key from a table, and drop it on the primary key of the other table.
7. In the Edit Relationships dialog box, make sure the correct fields are being linked.
8. Click the Enforce Referential Integrity checkbox, and click

Answers

Answer:relationships, show table, close, create

Explanation: just did it

Answer:

Use the drop-down menus to explain how to create a one-to-one relationship using the primary keys of two tables.

1. Open the database.

2. On the Database Tools tab, in the Relationships group, click

✔ Relationships

.

3. On the Relationship Tools Design tab, in the Relationships group, click

✔ Show Table

.

4. In the dialog box, click one of the tables to add, and click Add.

5. Click the other table to add, click Add, and click

✔ Close

.

6. Click and drag the primary key from a table, and drop it on the primary key of the other table.

7. In the Edit Relationships dialog box, make sure the correct fields are being linked.

8. Click the Enforce Referential Integrity checkbox, and click

✔ Create

Explanation: Just did it and its correct

1 point
Wal-Mart relies on the thousands of miles or roads and their massive
trucks in order to ship their goods all over the country. Which factor of
production are roads and trucks considered?
Capital
Human / Labor
Natural / Land
Entrepreneur

Answers

C a p I t a l.
Have a great day

In its 20X5 income statement, Tow, Inc. reports proceeds from an officer's life-insurance policy of $90,000 and depreciation of $250,000. Tow was the owner and beneficiary of the life insurance on its officer. Tow deducted depreciation of $370,000 in its 20X5 income tax return when the tax rate was 30%. Data related to the reversal of the excess tax deduction for depreciation follow: Year Reversal of excess tax deduction Enacted tax rates 20X6 $50,000 35% 20X7 $40,000 35% 20X8 $20,000 25% 20X9 $10,000 25% There are no other temporary differences. In its December 31, 20X5 balance sheet, what amount should Tow report as a deferred income tax liability

Answers

Answer:

the deferred income tax liability is $25,200

Explanation:

The computation of the deferred income tax liability is given below:

= Excess of depreciation as per tax over books × Tax rate

= ($370,000 - $250,000) × 21%

= $25,200

Hence, the deferred income tax liability is $25,200

We simply applied the above formula so that the correct value could come

And, the same would be considered

Suppose that a project has a depreciable investment of $1,000,000 and falls under the following MACRS year 5 class depreciation schedule: year 1: 20 percent; year 2: 32 percent; year 3: 19.2 percent; year 4: 11.5 percent; year 5: 11.5 percent; and year 6: 5.8 percent. Calculate the depreciation tax shield for year 2 using a tax rate of 30 percent.

Answers

Answer:

$96,000.

Explanation:

A depreciation tax shield is a method by which the tax paid reduces as a result of depreciation.

Depreciation in year 2 = 32%

Depreciation on equipment = $1,000,000 x 0.32 = $320,000

Depreciation tax shied = depreciation x tax = $320,000 x 0.3 = $96,000

How do you approach Marketing design for a production?

Answers

1. A sketch of it of how you want the product to look like
2. A prototype
3. Final product

Selecting a domain name that is similar to a rival firm is advantageous since it will show up on more search engines.
True or False
True
False

Answers

It false your welcome

If a company's current ratio increases from 1.2 to 1.4 from one year to the next, and its acid test ratio decreases from 0.20 to 0.15 over the same time period, the most likely explanation is that:

Answers

Answer:

The inventory has been reportedly increased and it should be checked.

Inventory management should be further examined.

Explanation:

Current Ratio = Current Assets/ Current liabilities

An increase in the current ratio means that there is an increase in the current assets or decrease in the current liabilities.

Acid test  Ratio=  Current Assets - Inventory / Current liabilities

If the acid test ratio is decreased it means that there is an increase in current liabilities or the current assets have decreased.

If we carefully look at the two formulas we find that inventory has increased and deduction of inventory from current assets reduces the amount of current assets and increases the current liabilities giving a bigger acid test ratio.

The inventory has been reportedly increased and it should be checked.

Inventory management should be further examined.

How often should you update you check register

Answers

Answer:

Review your checkbook register at least once a week. Your second goal should be to reconcile your checkbook as soon as possible after receiving your monthly statement. Once you've mastered the following steps, you should be able to balance your account each month within 30 minutes to 45 minutes.

Answer :Review your checkbook register at least once a week.

Explanation:

What is horizontal segmentation?

Answers

Answer: Horizontal segmentation try's to understand what customers want and then to deliver it.

Do you think JNK should be more ethical? Explain your answer.

Answers

Yes, in my opinion JNK should be ethical. Being an ethical business will gain more sales, increasing its customer loyalty and introduce more new customers. It will reduce the waste materials which are thrown off to the sea. Many people only trust ethical businesses. This will increase sales leading to where JNK can invest in new technology. When being an ethical business, JNK will not employ children. However, the downfall for being ethical is that, the product prices will increase which some people don’t want to pay higher prices. It will increase the average cost. In the end, I think JNK should be an ethical business because in the short run it will come through challenges but in the long run it will have many advantages.

Answer:

"god is a woman"

Explanation:

"and its megan thee stallion"

Beyond standard benefits like vacation time, sick leave, and health

insurance, what do you think a business could offer that would make

a potential employee want to work there over a rival company?

Explain your answer.

Answers

Answer:

Higher salary, retirement plan

Explanation:

Before an employee takes up a job like this over what a rival business is offering, he checks the various benefits that each of these jobs has to offer him. Some of these are vacation time, sick leave etc.

But one very crucial determining factor is salary. Lots of people take up jobs with the pay in mind first. A higher salary makes a job more attractive to an employee. If the business is offering a higher salary, chances are that this employee would consider it to be more attractive. Also a job that offers retirement benefits is also attractive.

If the Table Analyzer finds unrelated data in a table, what does it suggest a user do?
O split the table into queries
O break the table into multiple tables
O move all the data to a new report
O move some data to a different database

Answers

Answer:

break the table into multiple tables

Explanation:

Answer:

B

Explanation:

Sheila has a plan to save $45 a month for 18 months so that she has $810 to remodel her bathroom. After 13 months Sheila has saved $510. If the most Sheila can possibly save is $70 per month, which of the following statements is true? a. Sheila will meet her goal and does not need to adjust her plan. b. Sheila must save $50 per month to achieve her goal. c. Sheila must save $60 per month to achieve her goal. d. Sheila will not be able to achieve her go

Answers

Answer:

Sheila has a plan to save $45 a month for 18 months so that she has $810 to remodel her bathroom. After 13 months Sheila has saved $510. If the most Sheila can possibly save is $70 per month, which of the following statements is true?

a.} Sheila will meet her goal and does not need to adjust her plan.

b}  Sheila must save $50 per month to achieve her goal.

c}  Sheila must save $60 per month to achieve her goal. <<CORRECT

d}  Sheila will not be able to achieve her goal.

Explanation:

Edge 2021

Sheila will meet her goal and does not need to adjust her plan. The correct option is a.

What is the introduction of savings?

Savings is the amount left over after an individual's consumption demands have been satisfied. Individuals who make purchases using credit and are subject to increasing EMI obligations would have little to no monthly savings. Savings aid in accumulating money for the future.

To find out if Sheila will be able to achieve her goal, we need to determine how much more she needs to save in the remaining 5 months.

Sheila's goal is to save $810, and after 13 months, she has saved $510. Therefore, she needs to save an additional:

$810 - $510 = $300

in the remaining 5 months.

If the most Sheila can save is $70 per month, then the maximum amount she can save in the remaining 5 months is:

$70 x 5 = $350

Since $350 is more than the $300 she needs to save, Sheila will be able to achieve her goal and does not need to adjust her plan.

Thus, the ideal selection is option a.

Learn more about Saving here:

https://brainly.com/question/30004719

#SPJ7

6. Simplify the following ratios:

12 cm: 1m​

Answers

Answer:

its already simplified.

Explanation:

Can ah budget include donations to charities

Answers

Answer:

A common rule of thumb for budgeting for charitable donations uses the concept of the 50/30/20 split for your budget. The other portion is for your wants: About 30 percent of your budget goes into this category, which might include vacations, gifts, or date nights.

Standards for the Code of Ethics for Market Intelligence Professionals includes to manipulate the data as the researcher sees fit. to provide honest and realistic recommendations and conclusions in the execution of one's duties. to comply with enforced laws, allowing for bribery where socially acceptable. to abide by personal guidelines, even if they fall out of line with the company's guidelines. to conceal information, such as one's identity, for the integrity of the results.

Answers

Answer:

to provide honest and realistic recommendations and conclusions in the execution of one's duties

to comply with enforced laws,

Explanation:

A manager’s responsibility to actively control risk factors for food borne illnesses is called

Answers

Answer:

A hazard analysis critical control point (HACCP)

Why would you want to use a check register

Answers

BECAUSE YOU NEED TO REGISTER ALL CHECKS FAST AND EASY

SUB TO MR BEAST

Which of the following is a reason you can be fired under an employment at
will policy?
A. The company relocates to a smaller facility.
B. The company learns that your parents were born in Russia.
C. The company suspects you are stealing inventory.
D. The company wants to hire a younger worker.

Answers

Answer:

A

Explanation:

Cause they might need new people if they relocate Nd might fire a lot of ppl if the working space is small

Trade is appreciated and promoted throughout the world but there exists certain loopholes for efficient trade system .Highlight the concerned factors ?

Answers

Answer:

Trade is the transaction of goods and monetary around the world.

Explanation:

Trade and commerce are necessary for the economic development and survival of this world. It is appreciated and is promoted throughout the world, but still there are some loopholes in the trading system.

Trading is generally the economic transaction that is carried all through the world for comparative advantage among the different countries. The goods and products traded are mainly capital goods, consumer goods, financial assets, and others which are traded among the countries.

It creates a dual economy in the world for the less developed countries and due to this the country which exports these goods are developing while those poor countries importing  these goods have seen a stop in its development.

Due to the foreign investment, the poor countries have not been able to benefit much from it.

The gains is limited for the exported countries due to the export of only the primary goods.

An investor has up to $250,000 to invest in two types of investments. Type A pays 6% annually and type B pays 8% annually. To have a well-balanced portfolio, the investor imposes the following conditions. At least one-fourth of the total portfolio is to be allocated to type A investments and at least one-fourth of the portfolio is to be allocated to type B investments. What is the optimal amount that should be invested in each type of investment

Answers

Answer:

The optimal amount that should be invested in each type of investment is:

Project A (43%) = $107,500

Project B (57%) = $142,500

Explanation:

a) Data and Calculations:

Total investible funds = $250,000

Types of investment vehicles =         Type A                  Type B

Annual returns from each vehicle         6%                         8%

Ratio of annual returns =                       43%(6/14)           57% (8/14)

Therefore, allocation to each type:

Type A =  $107,500 ($250,000 * 43%)  

Type B = $142,500 ($250,000 * 57%)

What are some benefits of paying taxes? Check all that apply.

ensuring that the needs of the nation are fulfilled
paying for public works such as highways and museums
reducing the amount of money consumers can spend
slowing growth in the economy
paying for government programs that help citizens

Answers

Answer:

A,B,E

Explanation:

got it right on test

Answer:

a b e

Explanation:

right on edge

Tony, the human resources manager for TopShelf Beverages, is confidentially working with line managers to lay off a significant portion of the work force, while simultaneously processing generous retention bonuses and sizeable salary increases for top executives, one of whom Tony is also investigating for corrupt management practices. Feeling conflicted, Tony remembers that human resources managers typically face greater _____________ challenges than other managers.

Answers

Answer: ethical

Explanation:

Ethics simply refers to the standard of knowing what's right and wrong. From the question, we can infer that Tiny is facing ethical challenges as his action will harm some and benefit others.

In this case, some of the workforce will be laid off while there will be an increase in salary for the top executives and one of the top executives is being investigated for corrupt practices. This is an ethical dilemma.

Match each job example with its career cluster.
Israel is a Cashier
Science, Technology, Engineering, and
Mathematics
Rakhee is an Aircraft Structure
Assembler
Manufacturing
Arie is a Chemist
Information Technology
Jake is a Flight Attendant.
Transportation and Logistics
Deb is a Video Game Designer.
Marketing, Sales, and Service

Answers

Answer:

Israel is a Cashier ⇒ Marketing, Sales, and Service

As a cashier, Israel is involved in the sales industry.

Rakhee is an Aircraft Structure  Assembler ⇒ Manufacturing

Assembling the structure of an airplane is a process in airplane manufacturing so this falls under manufacturing.  

Arie is a Chemist ⇒ Science, Technology, Engineering, and  Mathematics.

Arie is a chemist which is a science related field as it involves chemistry and biology.

Jake is a Flight Attendant ⇒ Transportation and Logistics

Jake as a flight attendant is in the transportation and logistics industry because planes transport people and goods.

Deb is a Video Game Designer ⇒ Information Technology

Deb as a video game designer is in the IT industry which deals with software and computer related ventures.

In marketing, persuasive strategles are referred to as

stimull

appeals

channels

Tallacies

Answers

Answer:

it is referred to as stimull

Explanation:

that is manipulating

Which of the following tips can hurt your cash flow? A. Increase your sales. B. Pay your bills early. C. Keep a cash reserve. D. Offer credit only to low risk borrowers. Please select the best answer from the choices provided A B C D

Answers

B. Pay your bills early.

Answer:

trust the wise one above ;)

Explanation:

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