Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. marley's plumbing shops has found that its common

Marley's Plumbing Shops has found that its common equity capital shares have a beta equal to...

90.2K

Verified Solution

Question

Finance

Marley's Plumbing Shops has found that its common equity capitalshares have a beta equal to 1.5 while the risk-free return is 8percent and the expected return on the market is 14 percent. Itscost of debt financing is 12 percent. The firm is financed with$120,000,000 of common shares (market value) and $80,000,000 ofdebt.

  1. What is the proportion of debt and equity?
  2. What is the CAPM?
  3. What is the after-tax weighted average cost of capital forMarley's, if it is subject to a 35 percent marginal tax rate?

Answer & Explanation Solved by verified expert
4.2 Ratings (866 Votes)
1Equity 120000000 Debt 80000000 Total firm capital 120000000 80000000 200000000 Proportion of equity in the firm capital structure 120000000 200000000 060100 60 Proportion of debt in the    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Marley's Plumbing Shops has found that its common equity capitalshares have a beta equal to 1.5 while the risk-free return is 8percent and the expected return on the market is 14 percent. Itscost of debt financing is 12 percent. The firm is financed with$120,000,000 of common shares (market value) and $80,000,000 ofdebt.What is the proportion of debt and equity?What is the CAPM?What is the after-tax weighted average cost of capital forMarley's, if it is subject to a 35 percent marginal tax rate?

Other questions asked by students

Q

A company offers health insurance to its employees. The insurance pays continuous premiums at the rate...

Advance Math
Q

Write a brief letter (three to four paragraphs) about love and leadership to the “Church.” Write...

Psychology
Q

The Easy Credit Company report the following table representing a breakdown of customers accounting to the...

Basic Math
Q

4. The product y = Ax of an m n matrix A times a vector...

Advance Math
Q

In its Fuel Economy Guide for 2016 model vehicles, the Environmental Protection Agency provides data on...

Basic Math
Q

7 An ammeter and a voltmeter are joined in series to a cell Their readings...

Physics
Q

Watkins Trophies , Inc. , produces thousandsTrophies, Inc. , produces thousands of medallions made of...

Accounting
Q

Units Question 4 H Ltd makes the following purchases and sales: 01-Thg1 Purchases 6.000...

Accounting
Q

During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are...

Accounting
Q

Cash basis net income and Accrual basis net income will equal in the long run....

Accounting
Q

Discuss the impact of the pro forma financial statements for predicting ability to meet future...

Accounting
Q

Las ganancias por la venta de equipos y los gastos por intereses se declaran en...

Accounting