Question 1

Calculate the after-tax WACC based on the following information:nominal interest rate on debt = 12%;cost of common equity = 25%;common equity = $700,000;interest-bearing debt = $300,000;and a tax rate = 25%.

Accepted Answer

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Question 2

Calculate the weighted average cost of capital (WACC)based on the following information:the equity multiplier is1.66;the interest rate on debt is 13%;the required return to equity holders is 22%;and the tax rate is 35%.

Accepted Answer

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Question 3

Find a venture's "economic value added" (EVA)based on the following information:EBIT = $200,000;financial capital used = $500,000;WACC = 20%;effective tax rate = 30%.

Accepted Answer

EVA = EBIT – (financial capital used x WACC) x (1 - effective tax rate)
EVA = $200,000 – ($500,000 x 20%) x (1 - 30%)
EVA = $200,000 – $100,000 x 0.7
EVA = $200,000 – $70,000
EVA = $130,000

Therefore, the EVA for the venture is $40,000 (D).

Question 4

Calculate the after-tax WACC based on the following information:nominal interest rate on debt = 16%;cost of common equity = 30%;equity to value = 60%;debt to value = 40%;and a tax rate = 25%.

Accepted Answer

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Question 5

Estimate a firm's NOPAT based on: Net sales = $2,000,000;EBIT = $600,000;Net income = $20,000;and Effective tax rate = 30%.

Accepted Answer

NOPAT (Net Operating Profit After Tax) can be calculated using the formula:
NOPAT = EBIT x (1 - Effective tax rate)
Given, EBIT = $600,000 and Effective tax rate = 30%
Therefore, NOPAT = $600,000 x (1 - 0.30) = $420,000
Hence, the answer is B.

Question 6

Estimate a firm's economic value added (EVA)based on: NOPAT = $400,000;amount of financial capital used = $1,600,000;and WACC = 19%.

Accepted Answer

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Quiz 7: Types and Costs of Financial Capital

Calculate the after-tax WACC based on the following information:nominal interest rate on debt = 12%;cost of common equity = 25%;common equity = $700,000;interest-bearing debt = $300,000;and a tax rate = 25%.

Calculate the weighted average cost of capital (WACC) based on the following information:the equity multiplier is1.66;the interest rate on debt is 13%;the required return to equity holders is 22%;and the tax rate is 35%.

Find a venture's "economic value added" (EVA) based on the following information:EBIT = $200,000;financial capital used = $500,000;WACC = 20%;effective tax rate = 30%.

Calculate the after-tax WACC based on the following information:nominal interest rate on debt = 16%;cost of common equity = 30%;equity to value = 60%;debt to value = 40%;and a tax rate = 25%.

Estimate a firm's NOPAT based on: Net sales = $2,000,000;EBIT = $600,000;Net income = $20,000;and Effective tax rate = 30%.

Estimate a firm's economic value added (EVA) based on: NOPAT = $400,000;amount of financial capital used = $1,600,000;and WACC = 19%.