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Svetlanka [38]
4 years ago
10

Glassmaker has pre-merger $5 in debt and $10 in equity. Rate on debt is 11%. The risk free rate is 6%. The tax rate is 40% . The

levered beta is 1.36. The equity risk premium is 4%. What discount rate should you use to discount Glassmakers' free cash flows and interest tax savings?
Business
1 answer:
Marysya12 [62]4 years ago
6 0

Answer:

The answer is 11.44%

Explanation:

Solution

Given that:

Glass maker has a pre-merger of =$5 debt

Equity =$10

The rate on debt =11%

The risk free rate =6%

Tax rate =40%

The levered beta is =1.36

Equity risk premium is= 4%.

Now,

the next step is to find discount to use for Glass maker free cash flows and interest tax savings

Cost of equity (Ke) =  Risk free return + Beta ( Market return - Risk free return )

= 6% +1.36( 10%-6%)

=11.44%

Therefore, the rate to be used to discount free cash flows and interest tax savings is 11.44%

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If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals 9%.

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The unemployment rate = (number of unemployed people / total labour force) x 100

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2 years ago
Daniel derives utility from only two goods, cake (Qc) and donuts (Qd). The marginal utility that Daniel receives from cake (MUc)
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Answer:

240= 3Qc + 3Qd  

Explanation:

The computation of the Daniel's budget constraint is shown below;

Given that

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3 years ago
Which of the following factors does not affect the initial market price of a stock?
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Answer:

The correct answer is (C)

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Generally the common stocks worth per share is normally a limited quantity, for example, $0.05 or $0.01 and it has no association with the market estimation of the price of stock. The standard worth is once in a while referred to as the regular stocks.  The par value has no connection with the price of the stock.

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Between 2017 and 2060, the growth in the U.S. population will be accounted for by a growth in the foreign-born population of 85%.

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The census bureau believes that the U.S. population will change by more than 78 million by 2060.

Out of this number, the foreign-born population of the nation which includes immigrants and their children, will comprise of 85%.

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