Before-tax cost of debt is 11.0 % Federal-plus-state marginal tax rate is 40 % R

Question

Before-tax cost of debt is 11.0 %
Federal-plus-state marginal tax rate is 40 %
Real Estate Division Cost of Equity is 11.30 Estimated Divisional Beta .60
Ceramic Coating Division Cost of Equity is 18.73 Estimated Divisional Beta 1.95
Equip. Manufacturing Division Cost of Equity 13.78 Estimated Divisional Beta 1.05
Home product Division Cost of Equity 11.58 Estimated Divisional Beta .65

Estimated the Hurle rates of each division. Assume that all divisions use a 45 percent debt ratio for this purpose.

Explanation / Answer

Question 1 DIVISION PERCENTAGE ESTIMATED PRODUCT COST OF COST OF WACC WACC CORPORATE DIVISIONAL EQUITY EQUITY ASSETS BETA in % in % Real Estate 0.10 0.60 0.00 0.060 0.1130 11.30 0.0919 9.19 Ceramic Coatings 0.10 1.95 0.00 0.195 0.1873 18.73 0.1327 13.27 Equip. Manufacturing 0.30 1.05 0.00 0.315 0.1378 13.78 0.1055 10.55 Home Products 0.50 0.65 0.00 0.325 0.1158 11.58 0.0934 9.34

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.