FIN 600-WEEK 4 -9-2, 9-16, 10-2, 10-14 -GRADE A


Problem 9-2        
A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company’s common stock is .5.
Risk Free Debt Interest Rate Market Risk Premium Beta Taxes
40% 10% 8% 0.5 35%
a.      What is the company cost of capital?     
b.      What is the after-tax WACC, assuming that the company pays tax at a 35% rate?  


Problem 9-16                
What types of firms need to estimate industry asset betas? How would such a firm make the estimate? Describe the process step by step.
Problem 10-2                
Explain how each of the following actions or problems can distort or disrupt the capital budgeting process.                                                                                                                                                                                             a. Overoptimism by project sponsors.
b. Inconsistent forecasts of industry and macroeconomic variables.
c. Capital budgeting organized solely as a bottom-up process.


Problem 10-14          
Suppose that the expected variable costs of Otobai’s project are ¥33 billion a year and that fixed costs are zero.                                                                                                                                                       a. How does this change the degree of operating leverage (DOL)?                                                                                b. Now recompute the operating leverage assuming that the entire ¥33 billion of costs are fixed.

Are you Looking for Quality and Plagiarism-Free Assignment Help? Get Trusted Help From the Most Skilled Writers at Hire Your Personal Writer Today and Keep Up Your GPA this Semester.
275 words per page

You essay will be 275 words per page. Tell your writer how many words you need, or the pages.

12 pt Times New Roman

Unless otherwise stated, we use 12pt Arial/Times New Roman as the font for your paper.

Double line spacing

Your essay will have double spaced text. View our sample essays.

Any citation style

APA, MLA, Chicago/Turabian, Harvard, our writers are experts at formatting.

We Accept
Image 3