traction corporation required rate of return
Not what you're looking for?
3. Given that the traction corporation has a 40% debt, 60% equity capital structure and its WACC is 9.96%, find the required rate of return on equity. It is mentioned that the cost of debt before tax equals 9%, the tax rate is 40%. (Points: 2)
11.06%
13%
14.89%
8%
The information given is not sufficient to answer the question.
4. What effect will an increase in tax rate for a company have on the WACC? Assume that everything else remains the same.
(Points: 2)
It will reduce the WACC
It will increase the WACC
It will have absolutely no effect
It will first increase WACC, then decrease it.
Purchase this Solution
Solution Summary
The expert examines traction corporation for required rate of returns. Traction corporation on equity is given.
Solution Preview
3. Given that the traction corporation has a 40% debt, 60% equity capital structure and its WACC is 9.96%, find the required rate of return on equity. It is mentioned that the cost of debt before tax equals 9%, the tax rate is 40%. (Points: 2) ...
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
Recent Feedback
- "Your explanation to the answers were very helpful."
- "What does 1 and 0 means in the repair column?"
- "Went through all of the formulas, excellent work! This really helped me!"
- "try others as well please"
- "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking