11/19/21, 6:15 PM An Equity Analyst At An Investment Firm Is Estimat... | Chegg.com Home Study tools My courses My books Career Life Search Find solutions for your homework home / study / business / finance / finance questions and answers / an equity analyst at an investment firm is estimating the cost of capital for lath… Question: An equity analyst at an investment firm is estimating the cost … An equity analyst at an investment firm is estimating the cost of capital for Latham Gore, Inc. (LGI). The analyst plans to use her estimate in assessing the effect of LGI's new projects on the company's value. On a recent earnings release conference call, the analyst heard the LGI's CFO state the following: Post a question Answers from our experts for your tough homework questions Enter question “LGI has a long-term target capital structure of 40 percent debt and 60 percent equity. Our current capital structure differs from this target and this has been the case for many years. Over the coming years, we plan to move toward our target.” Continue to post 20 questions remaining From the recently released financial statements and her own calculations, the analyst has gathered the following data for Latham Gore: Current Levels ($) Debt at book value 130 Debt at market value 150 Shareholders' equity at book value Shareholders' equity at market value REGISTER FOR THE LEVEL I CFA® EXAM. 20 100 The debt and equity weights the analyst should use in finding LGI's cost of capital are closest to: Question 4 options: Register today 60 percent debt and 40 percent equity. 40 percent debt and 60 percent equity. Snap a photo from your phone to post a question 87 percent debt and 13 percent equity. We'll send you a one-time download link Expert Answer Anonymous answered this 11,546 answers 888-888-8888 Was this answer helpful? 0 0 Text me By providing your phone number, you agree to receive a one-tim automated text message with a link to get the app. Standard messaging rates may apply. Total Capital value = Value of Stock + Value of Debt =100+150 My Textbook Solutions =250 Weight of Stock = Value of Stock/Total Capital Value Add a textbook = 100/250 Add a textbook Foundation... =0.4 Weight of Debt = Value of Debt/Total Capital Value 9th Edition View all solutions = 150/250 =0.6 Comment 60 percent debt and 40 percent equity. https://www.chegg.com/homework-help/questions-and-answers/equity-analyst-investment-firm-estimating-cost-capital-latham-gore-inc-lgi--analyst-pla… 1/2 11/19/21, 6:15 PM An Equity Analyst At An Investment Firm Is Estimat... | Chegg.com Questions viewed by other students Home Study tools My courses My books Career Life Q: Mullineaux Corporation has a target capital structure of 70% common stock, 5% preferred stock, and 25% debt. Its cost of equity is 11%, the cost of the preferred stock is 5%, and the pretax cost of debt is 8%. The relevant tax rate is 35%. A) What is the Mullineaux’s WACC? B) Why doesn't the company use preferred stock financing because it costs less than debt? A: See answer 100% (1 rating) Q: A company has a target capital structure of 70% debt and 30% equity. If the company raises equity of less than $10 million, then its cost of equity is 12%. If the new equity issued is above $10 million, its cost of equity is 14%. The first break point in the cost of capital raised due to the change in the cost of equity is closest to: Question 15 options: $33.33 million... REGISTER FOR THE LEVEL I CFA® EXAM. Register today A: See answer Show more YOU R J OU R N E Y I S WAI T I N G F OR YOU . COMPANY LEGAL & POLICIES CHEGG PRODUCTS AND SERVICES CHEGG NETWORK CUSTOMER SERVICE © 2003-2021 Chegg Inc. All rights reserved. https://www.chegg.com/homework-help/questions-and-answers/equity-analyst-investment-firm-estimating-cost-capital-latham-gore-inc-lgi--analyst-pla… 2/2
