Accounting Help for College and University Students

Calculating the cost of debt.

PC, Inc., is trying to determine it's cost of debt. The firm has a debt issue outstanding with 7 years to maturity that is quoted at 87 percent of face value. The issue makes semiannual payments and has an embedded cost of 6.5% annually. What is PC's pretax cost of debt? If the tax rate is 38%, what is the aftertax cost of d ...continues

Given the following information for Janicek Power Co., find the WACC. Assume the company's tax rate is 35%.

Given the following information for Janicek Power Co., find the WACC. Assume the company's tax rate is 35%. Debt: 5,000 8 % coupon bonds outstanding, $1000 par value, 10 years to maturity, selling for 96% of par; the bonds make semiannual payments. Common stock: 60,000 shares outstanding, selling for $75 per share; beta ...continues

WACC and NPV

Cusic Cordwood Co. has a project available that will provide aftertax cash flows of $185,000 for the next 6 years. The project has more risk than the company, so the president has told you to use an adjustment factor of plus 2 (+2) percent in your calculations. The company uses 65% equity and 35% debt in its capital structure ...continues

Calculating the Cost of Debt for Ying

Ying Import has several bond issuances outstanding, each making semiannual interest payments. The bonds are listed in table attached. If the corporate tax rate is 34%, what is the aftertax cost of Ying's debt? Coupon Price Face Bond Rate Quote Maturity Value 1 8.00% $106.38 5 years 10,000,000 2 7.50% $98.00 8 years 45, ...continues

Calculate the after-tax cost of debt at three different interest rates

Calculate the after-tax cost of debt under each of the following conditions: a) Interest rate 10%, tax 0% b) Interest rate 10%, tax 40% c) Interest rate 10%, tax 60%

Jo Company: Calculate cost of retained earnings using discounted cash flow method

JO Company's last dividend per share was $1. The stock sells for $20 per share. The expected growth rate is a constant 5 percent. Calculate the cost of retained earnings using the discounted cash flow method.

EBIT and Leverage

Big Apple, Inc., has no debt outstanding and a total market value of $80,000. Earnings before interest and taxes, EBIT, are projected to be $10,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Apple is c ...continues

Break-Even EBIT

Duval Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Duval would have 400,000 shares of stock outstanding. Under Plan II, there would be 200,000 shares of stock outstanding and $5 million in debt outstanding. The interest rate on the debt is 1 ...continues

Calculating WACC

Nichols Industries has a debt-equity ratio of 1.5. Its WACC is 16%, and its cost of debt is 11%. There is no corporate tax. a. What is Nichols's cost of equity capital? b. What would the cost of equity be if the debt-equity ratio were 1.0? What if it were 0.5? What if it were zero?

12 Multiple choice questions on portfolio of stocks, beta of stocks, beta of portfolio, CAPM, market rate, market risk premium , diversified portfolio , market risk , Security Market Line, unsystematic risk, default-free rate, expected inflation rate, etc.

1 In a portfolio of three different stocks, which of the following could not be true? a. The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isola-tion. b. The riskiness of the portfolio is greater than the riskiness of one or two of the stocks. c. The beta of the portfolio ...continues