(Solution) 14-10. Sixx AM Manufacturing Has A Target Debt-equity Ratio Of .45. Its Cost Of Equity Is 13% And Its Cost Of Debt Is 6%. If The Tax Rate Is 35%, | Snapessays.com


(Solution) 14-10. Sixx AM Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 13% and its cost of debt is 6%. If the tax rate is 35%,


14-10. Sixx AM Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 13% and its cost of debt is 6%. If the tax rate is 35%, what is the company's

 

WACC?

 

 

A) 9.18%

 

B) 10.18%

 

C) 11.18%

 

D) 12.18%

 

 

14-14A. Paget, Inc, has a target debit-equity ratio of 1.25. Its WACC is 9.2%, and the tax rate is 35%.

 

If the company's cost of equity is 14%, what is its pretax cost of debt?

 

A) 8.25%

 

B) 9.25%

 

C) 10.25%

 

D)11.25%

 

 

14-14B. If instead you know that the aftertax cost of debt is 6.8%, what is the cost of equity?

 

A) 12.2%

 

B) 13.2%

 

C) 14.2%

 

D) 15.2%

 

 

14-17. Project Beta IRR

 

 

W .60 8.8%

 

X .85 9.5

 

Y 1.15 11.9

 

Z 1.45 15.0

 

 

 

14-17 A: Which projects have a higher expected return than the firm’s 11 percent cost of capital?

 

 

 

 

14-17 B: Which projects should be accepted?

 

 

 

14-17 C: Which projects would be incorrectly accepted or rejected if the firm’s overall cost of capital were used as a hurdle rate?

 


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This question was answered on: May 23, 2022

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