Purchase Solution

American Recovery and Reinvestment Act of 2009

Not what you're looking for?

Ask Custom Question

I need help identifying a clearer definition of risk and cost of capital for levered equity and risk and return of unlevered equity. Also what other decisions should a firm consider about cost of capital if they plan on undertaking multiple projects.

Purchase this Solution
Solution Summary

The expert examines the American recovery and Reinvestment Act of 2009. The cost of capital if they plan on undertaking multiple projects is determined.

Solution Preview

Risk and Cost of Capital for Levered Equity

Levered equity is that capital structure of a firm consists of both equity and debt for financing. The definition of risk and cost of capital for levered equity is discussed below:

Levered Risk:
For levered equity, risk can be defined as premium that is proportional to the market value of debt-equity ratio or difference between market rate and risk free rate. The risk of levered equity is higher for a firm due to use of different sources of finance (Bierman, 2010). For example, a levered equity has an expected return of either 74% or -51% in which negative percentage shows the degree of risk.

Levered Cost of Capital:
The cost of capital for levered equity can be defined as total of debt financing cost and equity financing cost. It is because a leverage firm uses both debt and equity as source of financing to arrange fund. The cost of capital for levered equity also represents as total of unlevered cost of capital and premium (Armitage, 2005). According to ...

Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

View More Free Quizzes
Related BrainMass Solutions

  • Summarization of a current proposed tax legislation

    The American Recovery and Reinvestment Act of 2009 On Feb. 13, 2009, Congress passed the American Recovery and Reinvestment Act of 2009 at the urging of President Obama, who signed it into law four days later as a direct response to the economic crisis

  • American Recovery and Reinvestment Act 2009

    Now in the American Recovery and Reinvestment Act of 2009, companies get several tax incentives.

  • The American Recovery and Reinvestment Act of 2009

    530388 The American Recovery and Reinvestment Act of 2009 Need a clearer and more defined explanation of American Recovery and Reinvestment Act of 2009 specifically: - How would Bonus Depreciation affect a company's stock price - If a CEO wanted to

  • Economic policy changes in the U.S.A

    The American Recovery and Reinvestment Act includes programs for reinvestment in the rebuilding of the infrastructure with the goal of jump starting employment and the economy.

  • Healthcare information system

    What standards in The American Recovery and Reinvestment Act of 2009 affect your organization? What might be some possible effects?

  • stabilizing the Macroeconomy

    The plan, along with parts of the American Recovery and Reinvestment Act signed into law on February 17, 2009, seeks to stabilize the housing market, increase lending and the flow of consumer credit, and reform the American financial system."

  • Comparing 2 Fiscal Policy Options

    459825 AD Logic Which of the following changes to fiscal stimulus package of 2009 for $862 billion (under the bill called American Recovery and Reinvestment Act of 2009) would have a larger overall impact on AD?

  • Explanation of tax credit affecting housing market

    The first time home buyer tax credit included in The American Recovery and Reinvestment Act of 2009 enabled first-time home buyers to realize the dream of home ownership.

  • Stimulus Bill

    The stimulus bill that was passed in 2009 was also called the American Recovery and Reinvestment Act of 2009 (ARRA), which is how it is commonly known. This was signed by the current President, Barack Obama.

View More Related Solutions