1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Debora [2.8K]
3 years ago
14

HH Industries has 50 million shares that are currently trading for $4 per share and $200 million worth of debt. The debt is risk

free and has and interest rate of 5%, and the expected return of HH stock is 11%. Suppose a strike causes the price of HH stock to fall 25% to $3 per share. The value of the risk free debt is unchanged. Assuming there are no taxes and the risk of HH's assets is unchanged, what happens to HH's equity cost of capital
Business
1 answer:
ELEN [110]3 years ago
6 0

Answer:

12%

Explanation:

For computing the equity cost of capital first we have to determine the weight of the capital structure after that the WACC and then finally equity cost of capital which is shown below:

Weight of capital structure

For debt  

= $200 million ÷ $400 million

= 0.50

For equity

= 50 million × $4 ÷ $400 million

= 0.50

Now the WACC is

= 0.50  11% + 0.50 × 5%

= 8%

Since the value fo equity is declined by

= 50 × $3

= $150

Now the equity cost of capital is

= WACC + (WACC - interest rate) × (debt ÷ equity)

= 8% + (8% - 5%) × (200 ÷ 150)

= 12%

You might be interested in
Dexter loses his breach-of-contract case against micheletta in a georgia state trial court. dexter appeals to the state court of
Wittaler [7]

After Dexter appeals to the state court of appeals and loses again, he files his next appeal with the <u>Georgia Supreme Court</u>.

<h3>What is a Court hierarchy?</h3>

This refers to the arrangement of courts in the method through which appeal flows. If the judgement at the lower court is not satisfying, an appeal can be made to the higher court in order to get redress and justice.

In conclusion, the Supreme court is the highest court in the Georgia state after the Court of appeal.

Read more about Court system

brainly.com/question/26360261

#SPJ1

6 0
1 year ago
What is gross profit? (Select the best answer.)
BlackZzzverrR [31]
The money left over the cost of making a product or providing a service
6 0
3 years ago
When buying groceries, Suki swipes a card to electronically subtract money from her checking account to pay. She is essentially
9966 [12]

Answer:

A. a debit card

Explanation:

5 0
2 years ago
Because companies target different customers with different kinds of products and services, performance measures should be tailo
adell [148]

Because companies target different customers with different kinds of products and services, performance measures should be tailored to the specific strategy of a company.

An organization's long-term objectives and the plan it has to achieve them are referred to as its strategy. In other words, it demonstrates the strategy for achieving the stated goal. The specific steps taken to accomplish the objectives in accordance with the strategy are referred to as a tactic. A plan outlines the ways by which the outcomes (goals) will be accomplished (resources). Strategy can be predetermined or it can develop organically when an organization competes or changes its surroundings. It entails tasks like strategic planning and strategic thought. Business, operational, and transformational strategies are all types of strategy. The five Ps each stand for a different method of strategy. Plan, Ploy, Pattern, Position, and Perspective fall under this category. These five factors make it possible for a business to create a more effective plan.

Learn more about strategy here

brainly.com/question/27747591

#SPJ4

6 0
1 year ago
What are queries usually used for?
solong [7]

Answer:

Queries can perform many different functions in a database. Their most common function is to retrieve specific data from the tables. The data you want to see is usually spread across several tables, and queries allow you to view it in a single data sheet.

4 0
3 years ago
Other questions:
  • An entrenpeneur knits sweaters for sale. The entrenpeneur has fixed costs of $100. When he makes 10 sweaters in one month, he mu
    7·1 answer
  • After Xavier and Alyssa deposited nearly $55,000 in a savings account at Bigbux Bank, the bank failed and filed for bankruptcy.
    14·2 answers
  • Please help!!!
    6·1 answer
  • A problem with the monetary unit assumption is that A. the dollar is a common medium of exchange. B. the dollar has been stable
    5·1 answer
  • Sadie is buying new furniture that costs $560. which is the most cost-effective option? a: credit card with an apr of 18 percent
    7·1 answer
  • On October 10, Joleen Vora applied for a $50,000 life insurance policy with Magnum Life Insurance Co. She named her husband, Jay
    15·1 answer
  • Department M had 2,000 units 40% completed in process at the beginning of June, 12,000 units completed during June, and 1,200 un
    12·1 answer
  • Carmel Corporation is considering the purchase of a machine costing $52,000 with a 4-year useful life and no salvage value. Carm
    5·1 answer
  • Stealth Fitness Center issues 7%, 15-year bonds with a face amount of $200,000. The market interest rate for bonds of similar ri
    11·1 answer
  • A stock has a beta of 1.3. The systematic risk of this stock is ____________ the stock market as a whole.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!