This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Rogue River Retail Inc. has a before-tax cost of debt of 8.00, a cost of equity of 12.00, a tax rate ... (Read 130 times)

DyllonKazuo

  • Hero Member
  • *****
  • Posts: 565
on: Jul 11, 2018
Rogue River Retail Inc. has a before-tax cost of debt of 8.00, a cost of equity of 12.00, a tax rate of 30.00 and no preferred stock outstanding. If the firm is made up of 50 debt and 50 equity, what is the firm's after-tax cost of borrowing?
 
  A) 12.00
  B) 11.60
  C) 8.00
  D) 5.60

Question 2

Financial theory suggests and empirical evidence supports the idea that firms have apecking order by which they choose to raise funds to finance assets. From the first source of financing to the last this pecking order is:
 
  A) internally generated funds, debt, and new equity.
  B) debt, internally generated funds, and equity.
  C) equity, debt, and internally generated funds.
  D) None of the above, there is no such preference.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

ttt030911

  • Sr. Member
  • ****
  • Posts: 315
Reply #1 on: Jul 11, 2018
Answer to Question 1

D
Explanation: D) = Kd (1-t) = 8  (1-.3 ) = 5.60.

Answer to Question 2

A


DyllonKazuo

  • Member
  • Posts: 565
Reply 2 on: Jul 11, 2018
Gracias!

bblaney

  • Member
  • Posts: 323
Reply 3 on: Yesterday
Excellent

« previous next »
 

Did you know?

Multiple experimental evidences have confirmed that at the molecular level, cancer is caused by lesions in cellular DNA.

Did you know?

Patients who have undergone chemotherapy for the treatment of cancer often complain of a lack of mental focus; memory loss; and a general diminution in abilities such as multitasking, attention span, and general mental agility.

Did you know?

Acute bronchitis is an inflammation of the breathing tubes (bronchi), which causes increased mucus production and other changes. It is usually caused by bacteria or viruses, can be serious in people who have pulmonary or cardiac diseases, and can lead to pneumonia.

Did you know?

The average older adult in the United States takes five prescription drugs per day. Half of these drugs contain a sedative. Alcohol should therefore be avoided by most senior citizens because of the dangerous interactions between alcohol and sedatives.

Did you know?

In 2006, a generic antinausea drug named ondansetron was approved. It is used to stop nausea and vomiting associated with surgery, chemotherapy, and radiation therapy.

Brumbies on the Chandler River, Oxley Wild Rivers National Park. Brumbies on the Chandler River, Oxley Wild Rivers National Park.
On August 17, 1807, thousands of New Yorkers gathered along the Hudson River. Ma On August 17, 1807, thousands of New Yorkers gathered along the Hudson River. Ma
Situations Causing Changes in Respiratory Rate Situations Causing Changes in Respiratory Rate
For each function f(x) = 6x^2 - 4, estimate the instantaneous rate of change for the given ... For each function f(x) = 6x^2 - 4, estimate the instantaneous rate of change for the given ...
An eager graduate student at Carleton, counts geese in the marshes off the Ottawa river. In ... An eager graduate student at Carleton, counts geese in the marshes off the Ottawa river. In ...
Explain the myogenic autoregulation of the glomerular filtration rate Explain the myogenic autoregulation of the glomerular filtration rate
Video: Hip Animation

For a complete list of videos, visit our video library