Question Details

(solution) Can anyone please help - need answers to the following questions


Can anyone please help - need answers to the following questions in excel - thanks!


These problems are available in MyFinanceLab.

1.

Changing WACC and optimal choice. Austin Enterprises is currently an all-equity firm. The firm is considering selling debt (bonds) and retiring some of the equity. However, at each level of debt, debt becomes more expensive (cost of debt is rising), and the riskiness of the equity also rises with more and more debt. Using a spreadsheet, determine the best combination of debt and equity for Austin Enterprises if

  • The current beta of Austin Enterprises is 0.85.
  • The current market return is 12%.
  • The current risk-free rate is 3%.
  • The total equity is 20,000,000 shares at $25 per share.
  • Debt is sold in units of $2,000,000.
  • The first unit of debt has a cost of 7.5%.
  • The tax rate of Austin Enterprises is 40%.
  • For each additional unit of debt (each additional $2,000,000), the cost of debt rises by 0.85%, and the beta of Austin Enterprises rises by 0.025.

Where is the WACC the lowest? Graph the results of the changing WACC.


 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Jan 30, 2021

PRICE: $15

Solution~0001017622.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Jan 30, 2021

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.

Order Now