Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. vanmannen foundations, inc. (vf) vanmannen foundat

VanMannen Foundations, Inc. (VF) VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has...

80.2K

Verified Solution

Question

Finance

VanMannen Foundations, Inc. (VF) VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below. EBIT = $80,000 Growth = 0% Orig cost of equity, rs = 10.0% No. of shares = 10,000 Price per share = $60.00 Tax rate = 25% Refer to the data for VanMannen Foundations, Inc. (VF). Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, what would be VF's new WACC and its new value of operations? New interest rate = rd = 6.00% New cost of equity = rs = 10.75% New Debt/Value = wd = 20% New Equity/Value = ws = 80% WACC Value

a. 9.50% $631,579 b. 10.70% $683,641 c. 10.40% $670,237 d. 9.80% $644,211 e. 10.10% $657,095

Answer & Explanation Solved by verified expert
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

Other questions asked by students