Corporate Finance

1-A firm has a cost of debt of 5.8
percent and a cost of equity of 10.5 percent. The debt–equity ratio is
.54. There are no taxes. What is the firm’s weighted average cost of
capital? a-9.32% b-7.38% c-8.85% d-8.17% e-7.97% 2- Gulf Shores Inn is comparing two
separate capital structures. The first structure consists of 265,000
shares of stock and no debt. The second structure consists of 210,000
shares of stock and $1.50 million of debt. What is the price per share
of equity? a-$31.17 b-$33.57 c-$28.57 d-$27.27 e-$35.243-The Tree House has a pretax cost of
debt of 6.2 percent and a return on assets of 10.6 percent. The
debt–equity ratio is .40. Ignore taxes. What is the cost of equity? a-12.98% b-8.84% c-12.76% d-12.36% e-13.48%4- Room and Board is considering two
capital structures that have a break-even EBIT of $18,000. The
all-equity capital structure would have 13,500 shares outstanding. The
levered capital structure would have 10,000 shares of stock and $75,000
of debt. What is the interest rate on the debt? Ignore taxes. a-5.58% b-7.11% c-6.22% d-6.52% e-5.91%5- Kelso
Electric is an all-equity firm with 51,500 shares of stock outstanding.
The company is considering the issue of $350,000 in debt at an interest
rate of 8 percent and using the proceeds to repurchase stock. Under the
new capital structure, there would be 32,000 shares of stock
outstanding. Ignore taxes. What is the break-even EBIT between the two
plans? a-$63,385 b-$80,111 c-$45,949 d-$73,949 e-$51,6926- A firm is considering two different
capital structures. The first option is an all-equity firm with 37,500
shares of stock. The levered option is 25,400 shares of stock plus some
debt. Ignoring taxes, the break-even EBIT between these two options is
$52,400. How much money is the firm considering borrowing if the
interest rate is 7.2 percent? a-$210,694 b-$223,088 c-$246,012 d-$234,830 e-$268,3777- Malkin Corp. has no debt but can borrow at 7.25 percent. The firm’s WACC is currently 13 percent, and there is no corporate tax.What is the company’s WACC in parts (b) and (c)? (Do not round intermediate calculations and enter your answers as a percent rounded to the nearest whole number, e.g., 32.) WACC 15 percent % 60 percent %8- Debbie’s Cookies has a return on
assets of 8.7 percent and a cost of equity of 13.1 percent. What is the
pretax cost of debt if the debt–equity ratio is .81? Ignore taxes. a-2.97% b-3.78% c-3.63% d-3.27% e-3.45%

 

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