Finance questions
Not what you're looking for?
I understand that many of these problems can be done in excel, I need the formulas and calculations that would be used on a calculator to help me understand how to solve the problem myself.
1. The market value of your firm's equity is $500 million, which is also the value of your total debt. Your cost of debt (rd) is 6% and your cost of equity is (re) is 10%. What is your weighted average cost of capital (WACC) if your tax rate is 40%?
2. Crone Industries is planning its operations for next year, and Ronnie Crone, the CEO, wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.
Last year's sales = S0
$350
Last year's accounts payable
$40
Sales growth rate = g
30%
Last year's notes payable (to bank)
$50
Last year's total assets = A0
$500
Last year's accruals
$30
Last year's profit margin = M
5%
Target payout ratio
60%
3. You invest $50,000 in George's House Painting, Inc, borrowing $30,000 of the money at 9%. If you expect to earn a 20% return on your investment under this arrangement, what would you expect to earn on a % basis, if you put up the entire $50,000 from your own money? Assume no taxes.
Purchase this Solution
Solution Summary
The solution explains some finance questions relating to weighted average cost of capital, additional funds needed and rate of return
Solution Preview
1. WACC = Proportion of debt X after tax cost of debt + Proportion of equity X cost of equity
Value of equity = 500
Value of debt = same as value of debt = 500
Total capital = 1,000
Proportion of debt = 500/1,000=50%
Proportion of equity = 500/1,000= 50%
After tax cost of debt = cost of debt X (1-tax rate) ...
Purchase this Solution
Free BrainMass Quizzes
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
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
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking