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Apply Financial Analysis Concepts and Techniques

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"After-Tax Cost of Debt" L.L. Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8%. L.L. belives it could issue new bonds at par that would
provide a similair yield to maturity. If its marginal tax rate is 35%, what is L.L.'s after tax cost of debt?

(Note: input the correct data and use the appropriate formula in the answer cell)

Include an explanation of how cost of capital financing techniques affect the organization:


A project has an initial cost of $52,125, expected net cash inflows of $12,000 per year for 8 years and a cost of capital of 12%. What is the projects NPV? (Hint begin by constructing a time line.)

RATE (Discount Rate)
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8

Include an explanation of how to use capital budgeting and relevant cash flow to compare investment alternatives:

"Premium for Financial Risk"

Ethier Enterprise has an unlevered beta of 1.o. Ethier is financed with 50% debt and has a levered beta of 1.6.
If the risk -free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that Ethier's
shareholders require to be compensated for?

Given Data:
Unlevered Beta: 1.00
Levered Beta: 1.60
Risk-Free Rate: 5.50%
Market Risk Premium: 6.00%
Debt 50%
Equity 50%

Step 1: Calculate the Required Return if the company had no debt:

(Input data and appropriate formula in the answer cell)

Step 2: Calculate the Required Return if the company has debt:

(Input data and appropriate formula in the answer cell)

Step 3: Calculate the extra premium for taking on financial risk:

Include an explanation of how varying degrees of financial risk may command variations in shareholder return expectations

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Solution Summary

The expert applies financial analysis concepts and techniques.