{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

S07Assg9 - FIN 2200 CORPORATION FINANCE Sum 2007...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
FIN 2200 – CORPORATION FINANCE Sum 2007 Assignment #9 Professors: A. Dua NOTE: This assignment is to be handed in! Only Problems 1, 3, 5, and 6 will be marked? The scores will only be given for the final answer 1. Assume an M&M world with no taxes. The risk free rate of return is 4% and the market risk premium is 10%. XYZ Corporation could be financed with debt and equity according to the proportions specified in the table below. Fill in all the missing cells in the table below. Proportion of Equity Financing for XYZ Expected Return on XYZ’s Equity Expected Return on XYZ’s Debt XYZ’s WACC % XYZ’s Equity Beta XYZ’s Debt Beta Weighted Average Beta of XYZ’s securities 100% (no debt) 1.20 (no debt) 80% 18.7% 1.47 0.12 60% 23.2% 0.12 50% 26.8% 2.28 0.12 40% 6.6% 0.26 30% 34.2% 8.2% 3.02 20% 10% 0.60 10% 52% 12% 4.80 0.80 5% 14% 1.00 0% (no equity) 16% (no equity) 2. Use the data from #1 and plot XYZ’s expected equity return, its expected debt return, and its expected weighted average cost of capital on the graph below. Label your lines appropriately.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern