Purchase Solution

What is the debt-equity and WACC for Acetate Inc.?

Not what you're looking for?

Ask Custom Question

Acetate Inc. has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum. Treasury bills that mature in one year yield 8 percent per annum, and the expected return on the market portfolio over the next year is 18 percent. The beta of Acetate's equity is 0.9. The firm pays no taxes.

a. What is Acetate's debt-equity ratio?
b. What is the firm's weighted average cost of capital?
c. What is the cost of capital for an otherwise identical all-equity firm?

Purchase this Solution
Solution Summary

This solution shows step by step calculations for debt-equity ratio, WACC and cost of capital of a hypothetical all-equity firm. This solution is formatted in the attached Word document.

Solution Preview

Please see the attached word document for a better formatted solution

Acetate Inc. has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum. Treasury bills ...

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
Recent Feedback
  • "ty i have more need help with"
  • "ty i have jmore i need help with"
  • "great help"
  • "excellent help"
  • "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Motivation

This tests some key elements of major motivation theories.

View More Free Quizzes
Related BrainMass Solutions

  • Acetate Inc. Debt/Equity, WACC, Cost of Capital

    112131 Acetate Inc. Debt/Equity, WACC, Cost of Capital Acetate, Inc., has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum.

  • Acetate Inc.: What is Acetate debt-equity ratio and what is the firm's overall required return?

    The current treasury-bill rate is 8 percent, and the expected market premium is 10 percent. The beta on Acetate equity is 0.9. a. What is Acetate debt-equity ratio? b. What is the firm's overall required return?

  • Acetate, Inc.

    201633 Finance 15. 2 Acetate, Inc. , has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum.

  • Acetate debt-equity ratio & weighted average cost of capital

    What is the firm's weighted average cost of capital? c. What is the cost of capital for an otherwise identical all-equity firm? Acetate, Inc., has equity with a market value of $20 million and debt with a market value of $10 million.

  • Capital Structure

    B - What is the firm's WACC?

  • Cost of Capital

    58403 EQUITY Acetate, Inc., has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum.

  • WACC, Repurchase of stock, Treasury bond, Stock price

    51743 5 Consumer Mathematics Problems: WACC, Repurchase of stock, Treasury bond, Stock price, Price of bonds 1) Acetate, Inc., has equity with a market value of $20 million and debt with a market value of $10 million.

  • What is WACC, current beta, Unlevered beta?

    388073 Recapitalization for Bloom Flowers Inc: What is WACC, current beta Currently, Bloom Flowers Inc. has a capital structure consisting of 20 percent debt and 80 percent equity. Bloom's debt currently has 8 percent yield to maturity.

  • Rayburn Manufacturing Inc- Repurchase of Stock

    is consistent with (a) The solution calculates the firm's WACC and the cost of equity after the repurchase of stock

View More Related Solutions