Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the black knight has a debt-equity ratio of .6, a

The Black Knight has a debt-equity ratio of .6, a beta of 1.12, a stock price...

50.1K

Verified Solution

Question

Finance

The Black Knight has a debt-equity ratio of .6, a beta of 1.12,a stock price of $42 a share, and a tax rate of 34 percent. Thefirm just paid an annual dividend of $.80 a share and plans toincrease that amount by 3 percent annually in the future. The firmhas a pre-tax cost of debt of 7.7 percent. The risk-free rate is3.8 percent and the market rate of return is 8.4 percent. What isBlack Knight’s WACC?

a. 6.08 percent

b. 6.25 percent

c. 7.15 percent

d. 7.24 percent

Answer & Explanation Solved by verified expert
4.2 Ratings (900 Votes)
Information providedDebt equity ratio 06Beta 112Stock price 42Current stock dividend 080Dividend growth rate 3Pretax cost of debt 77Risk free rate 38Market rate of return 84Tax rate 34The cost of equity is calculated using the capital asset    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: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

The Black Knight has a debt-equity ratio of .6, a beta of 1.12,a stock price of $42 a share, and a tax rate of 34 percent. Thefirm just paid an annual dividend of $.80 a share and plans toincrease that amount by 3 percent annually in the future. The firmhas a pre-tax cost of debt of 7.7 percent. The risk-free rate is3.8 percent and the market rate of return is 8.4 percent. What isBlack Knight’s WACC?a. 6.08 percentb. 6.25 percentc. 7.15 percentd. 7.24 percent

Other questions asked by students

Q

A sunflower grows at a rate of 1 a day another grows at a rate...

Basic Math
Q

A project requires an initial investment of $100,000 and is expected to produce a cash inflow...

Finance
Q

Please Type Answer or Dont Bother Answering! Predict what would happen to the carbon cycle if plants...

Biology
Q

Do the following numbers have a finite binary expansion or not: 0.5, 0.125, 0.015625, 0.0125, 0.05

Advance Math
Q

II.     On November 1, 20x1, Bush Company issued 10% bonds with a face amount of $20...

Accounting
Q

Though the brain represents less than 2 percent of your body weight, it uses 25...

Biology
Q

Listen Which of the following statements does NOT apply as a descriptor of archaebacteria Single...

Biology
Q

011 10 0 points A jar of tea is placed in sunlight until it reaches...

Physics
Q

The neck and bottom of a bottle filled with liquid are 2 cm and 12...

Physics
Q

A population of values has a normal distribution with ? = 154.9 and ? =...

Basic Math
Q

The Supplies account balance at the end of the period is $22,000. Supplies totaling $18,800...

Accounting
Q

Customers who have switched service providers are less likely to become loyal customers even if...

Finance