As the cost of capital is increased, the:
a. IRR remains constant.
b. Payback period remains the same.
c. Discounted payback period increases.
d. Both "b" and c.
e. All of the above

In the event that Zoldt Corporation, which has a low P/E ratio, were to
acquire Sky Corporation, which has a higher P/E ratio, an analyst can be
certain that one of the following will occur.
a. Zoldt Corp. will see an immediate decrease in P/E.
b. Zoldt Corp. will see an immediate decrease in EPS.
c. Zoldt Corp. will see an immediate increase in the growth rate
of EPS.
d. Zoldt Corp. will see an immediate increase in EPS.

If a company's average collection period is higher than the industry average,
then the company might be:
a. Enforcing credit conditions upon its customers which are too
stringent.
b. Allowing its customers too much time to pay their bills.
c. Too tough in collecting its accounts.
d. Too liquid.

As the cost of capital is increased, the:
a. IRR remains constant.
b. Payback period remains the same.
c. Discounted payback period increases.
d. Both "b" and c.
e. All of the above

Answer: E
In the event that Zoldt Corporation, which has a low P/E ratio, were to
acquire Sky Corporation, which has a higher P/E ratio, an ...

Solution Summary

This solution is comprised of a detailed explanation to answer what will happen when the cost of capital is increased, when Zoldt Corporation, which has a low P/E ratio, were to acquire Sky Corporation, and if a company's average collection period is higher than the industry average.

6.In the event that Zoldt Corporation, which has a low P/E ratio, were to acquire Sky Corporation, which has a higher P/E ratio, an analyst can be certain that one of the following will occur.
a. Zoldt Corp. will see an immediate increase in EPS.
b. Zoldt Corp. will see an immediate increase in the growth rate of EPS
c. Zol

The financial manager of a firm determines the following schedules of cost of debt and cost of equity for various combinations of debt financing: Find the WACC.
1.Debt/Assets After-Tax Cost of Debt Cost of Equity WACC
0% 4% 8%
10%

(Calculating the WACC) The required return on debt is 8%, the required return on equity
is 14%, and the marginal tax rate is 40%. If the firm is financed 70% equity and 30% debt,
what is the weighted average cost of capital?
Please show how you got your answer in excel.

Question: The weighted average cost of capital for firm X is currently 10%. Firm X is considering a new project, but must raise new debt to finance the project. Debt represents 25% of the capital structure. If the after tax cost of debt will rise form 7% to 8%, what is the marginal cost of capital?
A)10.25%,
B)10.75%
C

Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at a cost of 9% and common equity at a cost of 16%. Assume debt and common equity each represent 50% of the firm�s capital structure.
Compute the weighted average cost of capital

In a world that is not perfect but risk neutral assume that the firm has projects worth $100 in down state and $500 in the up-state. The cost of capital for projects is 25%. However, if you could finance it with 50-50 debt, the cash flow rights alone are enough to make the cost of capital lower than 20%. Managers are intransigen

Discuss the concept of valuation with leverage. How could we estimate the appropriate cost of capital for a project? Explore how the financing decision of the firm can affect both the cost of capital and the set of cash flows that we discount?

The two companies I need to do this question for are JC Penny (JCP) and Sears (SHLD). Calculate the Cost of Equity Capital according to the Capital Asset Pricing Model (CAPM) formula.
For the CAPM, you can find the company's beta at finance.google.com. Use 10% as the expected return on the market portfolio.
Go to
http://

1. At an interest rate of 12%, the six-year discount factor is .507. How many dollars is $.507 worth in six years if invested at 12%?
2. If the PV of $139 is $125, what is the discount factor?
3. If the cost of capital is 9%, what is the PV of $374 paid in year 9?
4. A project produces a cash flow of $432 in year 1, $13