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
Masteriza [31]
3 years ago
15

Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden is considering borrowing fund

s at a cost of 6% and using these funds to repurchase existing shares of stock. Assume perfect capital markets. If Taggart borrows until they achieved a debt -to-equity ratio of 50%, then Rearden's levered cost of equity would be closest to:A) 10.0%B) 12.0%C) 15.0%D) 16.0%
Business
1 answer:
Alexxandr [17]3 years ago
4 0

Answer:

Option (C) is correct.

Explanation:

We have to use MM proposition that cost of equity will change itself in such a manner so that it can take care of its debt.

Cost of equity:

= WACC of all equity firm + (WACC of all equity - Cost of debt ) × (Debt -to-equity ratio)

At the beginning, when there was no debt,

WACC = cost of equity = 12 %

Levered cost of equity:

= 12% + ( 12% - 6%) × 0.5

= 15%

Therefore, Rearden's levered cost of equity would be closest to 15%.

You might be interested in
Public goods are any goods provided by units of local, state, or federal governments. a. true b. false
NeX [460]

Answer:

hi

Explanation:

the answer is A) true

i hope it helps

3 0
3 years ago
What risks do you think you would face if you were a successful manager in a large organization who suddenly had an offer to go
emmasim [6.3K]

Answer: I would consider the risk, factor of starting a new market and seeing it become better.

Treadwell decided to become a multi-brand franchise instead of staying with KFC,because he gained a full understanding of the retail fast food industry.

Explanation:

Starting a new business requires a lot of patience, strategic planning, funds, and a lot of policies to put in place. As a manager coming from a bank of exposure, you would be experienced but it would still require you building a brand, which isn't easy as you'll have to face completions from already existing marketers, but the right policy, good competitive edge would set you up for the best, but would need a lot of work.

Treadwell decided to become a multi-brand franchise instead of staying with KFC,because he gained a full understanding of the retail fast food industry. His experience revolved around how the corperate structure works, branding and what sets the motion for the organization. This were well enough for him to handle a brand for himself

3 0
2 years ago
Rice Corporation's attorney has provided the following summaries of three lawsuits against Rice_______.a.Lawsuit A: The loss is
ratelena [41]

Answer:

b.Lawsuit B: The loss is reasonably possible, but the loss cannot be reasonably estimated

YOUR WELCOME HAVE A GOOD DAY!

Explanation:

8 0
3 years ago
10. A 20-year-old student wants to save $3 a day for her retirement. Every day she places $3 in a drawer. At the end of each yea
deff fn [24]

Answer:

The future value of this students savings will be for 1,487,261.89 dollars

Explanation:

We will calculate the future value of an annuity 1,095 of 45 years at 12% interest rate:

PTM \times \frac{1-(1+r)^{-time} }{rate} = FV\\

PTM 1,095 dollars

time     45 years

rate          12% = 12/100 = 0.12

1095 \times \frac{(1+0.12)^{45} -1}{0.12} = FV\\

FV $1,487,261.89

3 0
3 years ago
If you want to determine how much money you need to invest in a fund that pays 5% annually to get $1,000 in two years, what valu
hodyreva [135]
<h3><u>Answer:</u></h3><h3>total cost of investment</h3>
5 0
2 years ago
Other questions:
  • A company fails to record one storeroom full of inventory in its year-end inventory records. as a result, this will cause:
    12·1 answer
  • 50 POINTS****WILL GIVE BRAINLIST
    10·1 answer
  • What must two people who want to trade with each other have in a barter economy?
    13·1 answer
  • How to find national survey of 2000 adult citizens of a nation found that 23​% dreaded​ valentine's day. the margin of error for
    11·1 answer
  • ___ is any direct to a consumer or business recipient that is designed to generate a response in the form of an order, a request
    6·2 answers
  • Devon Company has collected the following data for one of its​ products: Direct materials standard​ (4 pounds​ @ $1/lb.) ​$4 per
    7·1 answer
  • A corporation's legal capital:
    6·2 answers
  • Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the followin
    9·1 answer
  • Read the attached file
    12·1 answer
  • condominiums usually require a monthly fee for various services. at $320 a month, how much would a homeowner pay over a period o
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!