American exploration, inc., a natural gas producer, is trying to decide whether to revise its target capital structure. currently it targets a 50-50 mix of debt and equity, but it is considering a target capital structure with 90% debt. american exploration currently has 6% after-tax cost of debt and a 12% cost of common stock. the company does not have any preferred stock outstanding. a. what is american exploration's current wacc? b. assuming that its cost of debt and equity remain unchanged, what will be american exploration's wacc under the revised target capital structure? c. do you think shareholders are affected by the increase in debt to 90%? if so, how are they affected? are the common stock claims riskier now? d. suppose that in response to the increase in debt, american exploration's shareholders increase their required return so that cost of common equity is 16%. what will its new wacc be in this case? e. what does your answer in part d suggest about the tradeoff between financing with debt versus equity?
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Business, 22.06.2019 09:40, bennett2968
Boone brothers remodels homes and replaces windows. ace builders constructs new homes. if boone brothers considers expanding into new home construction, it should evaluate the expansion project using which one of the following as the required return for the project?
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Business, 22.06.2019 13:10, Mikey3414
Trey morgan is an employee who is paid monthly. for the month of january of the current year, he earned a total of $4,538. the fica tax for social security is 6.2% of the first $118,500 earned each calendar year, and the fica tax rate for medicare is 1.45% of all earnings for both the employee and the employer. the amount of federal income tax withheld from his earnings was $680.70. his net pay for the month is .
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American exploration, inc., a natural gas producer, is trying to decide whether to revise its target...
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