Chapter 8 Questions Question 1
1a
Book Value Debt /Equity = Book Value of Debt /Book Value of Equity
Book value of debt
Book value of equity
D/E
2500
2500
1
Shares Outstanding
Market Price
Market Value of Equity
50
$ 80.00
$ 4,000.00
Rate
Face value of a bond
Market Value of BBBBBBBBBBBBBond
0.8
$ 2,500.00
$ 2,000.00
Market Value( Debt/ Equity
0.5
1b
Book value debt ratio = BV of debt/BV of DEBT + BV of equity
BV of debt
BV of debt
BV of equity
$ 2,500.00
$ 2,500.00
$ 2,500.00
0.5
Market Value debt ratio= MV of debt + Mv of equity
The market value of debt
Market value of debt
The more the market value of equity
$ 2,000.00
$ 2,000.00
4000
0.333333333
1c
After tax cost of debt = cost of debt*(1-t)
Bond yield
tax rate
12%
0.4
0.072
1d
Cost of Equity= Rf+ B(E(RM)-RF)
Risk-free rate
beta
E(Rm- Rf)
Cost of Equity
0.08
1.2
0.055
0.146
Do you need help with your “Chapter 8 Questions accounting homework” ? Contact us.
Question 2
Question 2
2a.
Market Value Debt to equity ratio
Initial Investment
Initial equity in investment for the project.
0.6667
$ 100.00
$ 66.67
2b
Cashflows to equity = net income + depreciation
Net income
Depreciation
Cashflows to equity
9.6
5
14.6
NPV of CF to equity
Cashflow to Equity
The initial investment in the project
NPV of CF to equity
$ 14.60
$ 66.67
33.33
Question 6
Question 6
6(a)
Current beta
Tax rate
Debt 1
Debt 2
Unlevered beta
1.15
0.4
$ 500,000.00
$ 2,000,000.00
0.1796875
6(b)
Debt
The current cost of equity
Cost of equity (debt 1)
Growth rate
Increase in firm value.
$ 2,500,000.00
0.1106
0.1087
0.02
$ 53,551.30
Increase in firm value.
Shares outstanding
Increase in stock price
$ 53,551.30
100,000
$ 0.54
Similar Post: Memo Feedback
ORDER A PLAGIARISM-FREE PAPER HERE
We’ll write everything from scratch
Week 7 Chapter 8 Questions Select three formula-driven problems from Chapter 8 that you wish to showcase and prepare a Microsoft Excel document showing the Excel formulas used to prepare the solution for those problems.
Chapter 8 Questions
REMINDER: Part of the great you receive on your problems is the utilization of Formulas. Therefore, do not issue less that only requires a narrative!
