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

Who is Joe Biden's Mother

Answers

Answer:

Catherine Eugenia Finnegan

Explanation:

Answer:

Catherine Eugenia Finnegan

Explanation:

hope this helps

You want to take earnings from your part-time job to pay for a new laptop. Your monthly take-home
pay is $500 and the laptop costs $1,200. What percentage of your pay do you need to save in order to
buy the laptop in 12 months?
a. 5%
b. 10%
c.15%
d.20%

Answers

To buy the laptop in 12 months, 20% of pay is needed to save.

What are earnings?

Earnings refer to the actual profitability of the company. In simple words, it is also known as profits in the financial statements.

If monthly take-home pay is $500 and 20% of this pay is saved then the saving for one month comes to be $100. In 12 months, $1,200 will be saved to buy the laptop.

Therefore, D is the correct option.

Learn more about Earnings here:

https://brainly.com/question/1477138  

 

       

Please hurry!!!!!Which of the following is not a method used by careful consumers?
Compare stores and prices on an item
O Look for bargain brands and bulk pricing
Make a shopping list
O Buy a random item that is offered on special discount, today only

Answers

Answer:

last option

Explanation:

I just know so

Answer:

the last option - this is a marketing technique used to give the customer a sense of urgency

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%)

Jena is a full-time undergraduate student at State University and qualifies as a dependent of her parents. Her only source of income is a $10,000 athletic scholarship ($1,000, books; $5,500, tuition; $500, student activity fee; and $3,000, room and board). Jena's gross income for the year is: a.$3,000. b.$4,000. c.$500. d.$10,000.

Answers

A. 3,000 that’s your answer

Economics (FoolProof)

Which a debit or ATM card, you are spending your own money. With a credit card, you are always borrowing money.

True or False

Answers

Answer:

True

Explanation:

When payments are made from debit or ATM card, the amount is directly deducted from the saving account of the user.

However, in case of credit card, the money spent is a loan taken from banks which is to be paid at the end of every month. In case of delay of payment, fine is also imposed.

Hence, the given statement is true

Jessie and Preston are both managers at CPA4U, a large accounting firm. Each has a very different management style. Jessie frequently checks on her subordinates to see if there is any way she can help them to complete their projects. As a supervisor in the financial sector, Jessie maintains her moral integrity and is not swayed by pressures to take shortcuts. She tries to know a little bit about her employees' outside interests and always remembers everyone's birthday. Preston keeps to himself more and communicates with his subordinates mainly through emails; he's not particularly interested in his employees' after-work activities. His subordinates know exactly what is expected of them; they submit daily reports on their progress toward the weekly goals he has assigned them. Which type of leader is Jessie

Answers

Answer:

c.  a task-oriented leader

Explanation:

A task-oriented leader would focused on accomplishing goals by giving the assignments, setting clear objective among employees and deadlines through which the team could be finished the project within the prescribed time also at the same time the team would be focused. Also they are less worry with the bonding with employees when they are not at the workplace

Therefore the option c is correct

what the squared root of your hairline

Answers

Answer:

small......

EXPLANATION:

Answer:

PLZ-

Explanation:

i think it's around 3 inches

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.

What is horizontal segmentation?

Answers

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

This is really for Economics but...

How are wages affected by the market?

Answers

Answer:

They could help give stock to the store/s that's using them. Or, they are the ones getting money for the produce or business, but it helps them get more and more resources for their store.

Explanation:

Answer:

Economists argued that wages are determined by demand and supply.They called it the theory of wage determination They said The price of labor is determined in the free market like every other price by intersection,Supply and demand.

Explanation: that took me a moment to think that out for it to be understandable so it doesn't disorient you

In the Capacity Allocation problem with two classes, companies have to determine Group of answer choices How many discount customers should be allowed to book reservations How many full-fare customers should be postpone for later reservations How many full-fare customers are allowed to book reservations How many customers they should allow to book reservations

Answers

Answer:

The answer is "First Choice".

Explanation:

The capacity allocation implies assets within each instance; the instance is system activation. That location of resources that are subject to several optimization algorithm restrictions involves an extensive debris field whenever the status of each process is role transition, that's why the Firms must decide how often discount customers must be permitted to reserve for capacity distribution with 2 groups.

Read the passage. What department does Marnle work in? What is her profession?
Marnee works in a university's department. She used to be a Math teacher, now she advises other teachers on selecting text books and
making lesson plans. She no longer teaches.
Marnee works in the____
department. She is an)_____
1)option. A Administration B Support C Faulty 2) option A Academic dean B Superintendent of schools C Curriculum developer

Answers

Answer:

1.She is an administration

2. Works as a Curriculum developer

how does the government work with the soe's

Answers

Answer:

Explanation:

At times, an SOE is created out of a government agency through a process called corporatization. This allows the agency to convert itself into a for-profit business. Often, the newly formed SOE still operates with government goals in mind, but officially it operates as a commercial enterprise.

Jane has a 30% interest in a cash-basis general partnership. Her adjusted basis in the partnership was $50,000 at the beginning of Year 1. There were no distributions to Jane during the year. On August 1, Year 1, the partnership borrowed $200,000 for the following reasons: Purchase depreciable business equipment $ 30,000 Pay balance on existing note in full 170,000 All of the partners are personally liable for all partnership debts. The partnership incurred a $250,000 loss in Year 1. What amount can Jane claim as a loss from the partnership on her Year 1 individual income tax return

Answers

Answer:

30000

Explanation:

because I was a people that wice

Complete the following sentence.
can be caused by unemployment or lack of access to employment resources.

Answers

uhm financial crisis, poverty, homelessness, debt, etc...

Answer: poverty

Explanation:

Because the people abode said it was correct and I hope they were right because I need this answer lol.

Who determines your credit score?​

Answers

Answer:

Credit karma

Explanation:

Answer:

Your credit scores are determined by credit scoring models that analyze one of your consumer credit reports and then assign a score using complex calculations.

Explanation:

The five pieces of your credit score

Your payment history accounts for 35% of your score. How much you owe on loans and credit cards makes up 30% of your score. The length of your credit history accounts for 15% of your score. The types of accounts you have made up 10% of your score. Recent credit activity makes up the final 10%.

Question 16 of 20
Which of these is an example of something affected by contract law?
A. A patent
B. A license
C. A trademark
D. Due process

Answers

A license is an example of something affected by contract law. Hence, option C is correct.

What is contract law?

The main goal of contract law is to connect an agreement reached between two or more parties and the realities of the outside world. It will be your responsibility to do everything in your power to protect your clients' best interests.

A contract is an agreement between parties that establishes legal duties for both parties. The fundamental components necessary for the agreement to be a valid offer and acceptance, adequate consideration, capacity, and legality are: mutual assent, expressed through a contract-compliant offer,

A contract must contain several characteristics in order to be legitimate and recognized by the common law, including an offer, acceptance, consideration, the desire to establish legal relations, authority and ability, and certainty. Without these components, a contract is not enforceable by law and cannot be relied upon.

Thus, option C is correct.

For more information about contract law, click here:

https://brainly.com/question/14316157

#SPJ2

Answer: A license

Explanation:

The answer is B. A license

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will a. decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. b. increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. c. increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. d. decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles.

Answers

Answer: c. increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles.

Explanation:

A complementary good is the one which can be used only with another good. For example a CD can only run in a CD player or any other suitable device so the sales of CD is dependent upon the availability of device used to pay it. Other examples are tennis ball and tennis racket, mobile phone and sim cards, and others.

According to the given situation the decrease in price of tomato will be an advantage to the consumers as they will be able to purchase them with an affordable price and can produce tomato sauce this will promote the production of spaghetti noodles as tomato sauce is consumed along with spaghetti noodles this way the tomato sauce and spaghetti noodles are complementary goods for each other. The sales and production of one good will affect the sales and production of another.

A group of Japanese investors is visiting your office. During a
meeting there is a long period of silence. What should you do?

Answers

Answer:

Stay quiet until the silence breaks

Explanation:

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

Capital

Have a good day

Suppose the government wanted to regulate this market using a price-based instrument. What is the efficient level of a tax on emissions?

Answers

Answer:

Tax = Marginal External Damage

Explanation:

When a negative externality distorts market outcome, we often see that a government intervention is needed. We must incorporate the negative externality into the private decision of the producer. That is to say that we add marginal damage caused by the externality to the marginal private cost of production. The social outcome will be at the point where marginal social cost (MSC) is equal to Marginal private benefit (MPB).

Thus, the efficient level of tax on emission is set equal to the marginal external damage.

Tax = t  = MED

MSC = MPC + MED

        = MPC + t

The government can make money by borrowing from its population in the form of governmental bonds.

A. True
B. False

Answers

False I think I’m not sure tho

Answer:

False

Explanation:

6. Simplify the following ratios:

12 cm: 1m​

Answers

Answer:

its already simplified.

Explanation:

Which option is used to collaborate with other authors by comparing different versions of the same document?

Sections
Comments
Revisions
Track Changes

Answers

Answer: revisions

Explanation:

Right on edge 2021

Answer:

revisions

Explanation:

Jack offers to sell Jill his automobile for $10,000. Jill says she must think about but that she is not rejecting his offer. Jill goes home that day and comes to the realization that $10,000 is a great deal. She sends Jack a letter of acceptance by mail at 4pm by placing it in the drop box at the post office. Jill did not know that Jack had sent her a revocation letter at 3:30 from a different post office. The letter of revocation is scheduled for delivery the next day at 10am. What result

Answers

Answer:

The sale of the car is canceled

Explanation:

For two reasons I think this. Jack had already sent out a letter to jill stating that the car is no longer for sale. As the current owner of the vechile he has the right at any point in time to draw out of the deal up till the actual signing over of the car.  

Help me please.. there is no option on here for Human Resources principals, so I jus clicked business as the subject..

Answers

Answer:

it should be vision B because the vision contains the reason why the company was formed

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.

Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 50 pollution permits, which it can either use of sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it cots Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. After trading the permit, how many tons of pollution will Firm A emit

Answers

Answer:

20 more tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.

Explanation:

It is given that :

Amount of tons of pollutants emitted by the two firms A and B earlier = 100 tons

Cost of pollutants by firm A = $ 200 per ton of pollutions

Cost of pollutants by firm B = $ 100 per ton of pollutions

Since the cost for eliminating the pollutants into the air is more for the firm A, the ticket is also more valuable for firm A. And therefore, firm A will buy all the tickets form firm B for an amount around $ 101 to $ 199. It will do so as to have a positive consumer and also to produce surplus.

So firm A will eliminate 20 tons of pollution and will use 80 ton capacity from the tickets. And for firm B, it will eliminate all 100 tons of pollutions.

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

Other Questions
the articles of confederation was the first document to loosely govern the 13 states during the war with great britain the fledgling country nearly went through a second revolution at the end of the revolutionary war when disgruntled soldiers found out that they would not get paid for their services because the continental congress could not force the states to pay taxes or contribute to the salaries of the soldiers using the information in this lesson as well as additional information from the internet summarize in an essay the dilemma that occurred after the war and explain how the founders of the country came to the decision to write a constitution that could hold the states together and present a strong united front to the rest of the world your essay should be about 200 words What can you infer from the tone and content of the quotation from Samuel Gompers's letter?a. Samuel Gompers represented companies that sued striking workers.b. Samuel Gompers wrote to praise Judge Grosscup for supporting striking workers. How many people out of 100,000 will survive until age 90? Which of the following best describes the effects of the mass migration of both Mexican and African American laborers into American cities during World War ? In India, people are put into four main groups, or castes (varnas). The highest caste is the If two sources contradict one another ________.conduct additional researchpick the information with the better reputationuse the information that supports your thesis/claimuse common sense PLEASE HELPthe graph shows a plot of an objects velocity versus time for 15 seconds. is the acceleration of the object constant or changing? how do you know? what does this tell you about the net force on the object? PLEASE HELPPPPPPPPPPPPPPPP Kevin has these shirts in his closet. 3 blue shirts 5 red shirts 3 purple shirts 4 white shirtsKevin will randomly choose one shirt, not put it back and then choose another shirt. What is the probability that he will choose a red shirt and then a white shirt? The probability that it will rain on any given day is 15% or 0.15. Find the probability it will rain at least once in the next three days. For an F distribution, find the following: (a) f 0.25,825(b) f 0.10,12,15(c) f 0.01,12,6 If coal is a fossil fuel, this means it is a ___ resource?A) non-renewableB) renewable Right answer will be marked brainlist . Distribute 3x(5x-5)a) 12x^2+8xb) 15x^2+10xc) 12x^2-9xd) 15x^2-15x Sally drives from Turlock to Los Angeles at anaverage speed of 60 miles per hour. Turlock isapproximately 300 miles from Los Angeles. Whichof the following graphs could give Sallysapproximate distance d, in miles from Los Angeles,in terms of time t, in hours? A, B, C, D, or E? a sample of gas at 25.0 c has a volume of 11.0 L and exerts a pressure of 660.0 mmHg. how many moles of gas are in the sample What powers do the federal government and the states have in the ratification of an amendment?I need helppplplplplplplpllpl fast Tell me more about the parts of the water cycle and how they work. Whats another word for average Two thirds of the money in my pocket is 50 cents. a, what is one third of the money in my pocket