Purchase Solution

Equity Capital

Not what you're looking for?

Ask Custom Question

Duval, Inc. uses only equity capital and it has two equally sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0% and the corporate WACC is 12.0%. All of Division A's projects are equally risky as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept?

A Division B project with a 13% return
A Division B project with a 12% return
A Division A Project with an 11% return
A Division A project with a 9% return
A Division B project with an 11% return

Purchase this Solution
Solution Summary

Response discusses the Equity Capital

Solution Preview

Equity Capital
Duval, Inc. uses only equity capital and it has two equally sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0% and the corporate WACC is 12.0%. All of ...

Purchase this Solution
Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

View More Free Quizzes
Related BrainMass Solutions

  • American Recovery and Reinvestment Act of 2009

    Risk and Cost of Capital for Levered Equity Levered equity is that capital structure of a firm consists of both equity and debt for financing.

  • Optimal cost of capital

    Equity is the one of the ways by which the company can raise the capital. The other way of raising the capital is the issue of debentures .Raising of capital by equity means the company is raising the owners' capital.

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

    Asset beta is appropriate in calculating cost of equity capital where there is no debt present in the capital structure.

  • Capital Structure, Cost of Capital

    Answers to questions on Capital Structure, Cost of Capital. It calculates a firm's weighted-average cost of capital at various combinations of debt and equity.

  • Solving: Weighted Average Cost of Capital

    Asset beta is appropriate in calculating cost of equity capital where there is no debt present in the capital structure.

  • What is the WACC for Lee Family Firms?

    = $45 * 35,000 = $1,575,000 Debt Capital = Price per bond * number of bonds = $999 *1000 = $999,000 Total Capital = Equity Capital + Debt Capital = 1,575,000 + 999,000 = $2,574,000 Weight/ proportion of equity capital = Equity

  • Stock Dividend

    Show how the equity accounts change: Common stock ($1 par value) $ ______ Capital surplus ______ Retained earnings ______ ===== Total owners' equity

  • Financing and Valuation

    Weighted-average cost of capital =(Cost of equity*equity percent of capital) + (after-tax cost of debt*debt percent of equity) Because debt + equity = total capital, Weighted-average cost of capital =(Cost of equity*(1-debt percent of capital))

  • Cyclone Software Co. is trying to establish its optimal capi

    Currently, Cyclone's cost of equity is 14%, whichis determined by the CAPM. What would be Cyclone's cost of equity if it changed its capital structure to 50% debt and 50% equity?

  • WACC and Corporate Tax for a Firm

    The same firm as in question 4 above changes its capital structure to reflect a 50/50 split between debt and equity (that is 50% debt and 50% equity). What will its cost of capital be now?

View More Related Solutions