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Vitek1552 [10]
1 year ago
12

QUESTION 1

Business
1 answer:
Archy [21]1 year ago
5 0

I)

Weight of equity  is 11.68%

Weight of preferred shares is 25.23%

Weight of debt is 63.08%

II)

Cost of equity is 15.00%

Cost of preference shares  is 10.19%

After-tax cost of debt is 7.20%

III)

WACC is 8.86%

What is capital structure weight?

Capital structure weights mean the proportions of total finance of the company that each different sources of capital contribute to the overall funding of the company.

The first task is to compute the market value of each source of capital

Market value of equity=share price*shares outstanding

Market value of equity=RM$25*40000

Market value of equity=RM$1,000,000

Market value of preference shares= RM$2,000,000*RM$1.08/RM$1.00

Market value of preference shares=RM$2,160,000

Market value of debt= RM$6,000,000*RM$90/RM$100

Market value of debt=RM$5,400,000

Total market value of the company=RM$1,000,000+RM$2,160,000+RM$5,400,000

Total market value of the company=RM$8,560,000

weight of equity=RM$1,000,000/RM$8,560,000

weight of equity=11.68%

weight of preferred shares=RM$2,160,000/RM$8,560,000

weight of preferred shares=25.23%

weight of debt=RM$5,400,000/RM$8,560,000

weight of debt=63.08%

What cost of capital for capital structure mean?

This refers to the after-tax cost of each funding source

The cost of equity can be computed based expected dividend , the share price as well as the dividend growth rate

share price=expected dividend/(r-g)

share price=25

expected dividend=2

r=cost of equity=unknown

g=perpetual dividend growth=7%

25=2/(r-7%)

25*(r-7%)=2

r-7%=2/25

r=(2/25)+7%

r=15.00%

The cost of preferred stock can be determined from the price as well, where the share price is present value of annual dividend based on the present value formula of a perpetuity

share price=annual dividend/r

share price=1.08

annual dividend=11%*1

annual dividend=0.11

r=cost of preferred stock=unknown

1.08=0.11/r

r=0.11/1.08

r=10.19%

The pretax cost of debt is the 12% interest rate

after-tax cost of debt=12%*(1-40%)

after-tax cost of debt=7.20%

What is weighted average cost of capital(WACC)?

WACC is the sum of individual costs of capital source multiplied by their weights in the firm's capital structure

WACC=(cost of equity*weight of equity)+(cost of preferred stock*weight of preferred stock)+(after-tax cost of debt*weight of debt)

WACC=(15.00%*11.68%)+(10.19%*25.23%)+(7.20%*63.08%)

WACC=8.86%

Find out more on WACC on:brainly.com/question/25566972

#SPJ1

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Answer:

6.39%

Explanation:

The cost of the machine is $600,000

The net income is $23,000

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The first step is to calculate the average investment

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= $23,000/$360,000

= 0.0639×100

= 6.39%

Hence the accounting rate of return is 6.39%

7 0
3 years ago
The Coalition of Independent Music Stores, a group of 44 prominent independent record stores in 25 states, operates as a way for
ValentinkaMS [17]

Answer:

E. a contractual system.

Explanation:

Based on the information provided within the question it can be said that this form of ownership is known as a contractual system. This system is various levels of distribution and production unite in order to accomplish the goal of increasing sales for the company as a whole, which they otherwise would not be able to do separately. Which is what the stores in this scenario are doing by using cooperative advertising to increase their sales.

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SNC is considering evaluating the payment profile of its customer base, especially focusing on customers who are chronically del
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I would decline the proposal to drop Super Sports Centers.

Explanation:

In order to be able to accept or decline dropping SSC as a customer we must first calculate the cost of being paid after 200 days.

If you analyze it from an accounting point of view, dropping SSC will decrease your operating profits by $130,000 and that might result in your firm not being able to make a profit anymore.

In my opinion, the cost analysis is not complete because in order to calculate EBIT your are simply subtracting COGS from revenue (which is correct but incomplete). When you make important business decisions, you must determine which is the least of evils. Is reducing your DSO so important that you will risk going bankrupt? How much does financing SSC costs? Since SCC takes so long to pay, you should probably record the present value of the sale (similar to a non-interest bearing note).

You must also remember that if your total sales decrease by 20%, your COGS will increase since fixed costs per unit will increase. Probably the best way to understand this is to analyze the situation like a special order sale. SNC should probably calculate their manufacturing (or retailing) costs without SSC and that way they will be able to determine the real advantage or disadvantage of having SSC as a client.

4 0
3 years ago
Todays electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the com
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Answer:

Market Condition: Large Facility , Mid - Sized Facility, Small Facility , No Facility

Good Market : 0 , $250,000 , $350,000 , $550,000

Fair Market : $19,000, 0, $29,000 , 129,000

Poor Market : $310,000, $100,000 , $32,000 , 0

Explanation:

Large Facility :

Good Market 550,000 - 550,000 = 0

Fair Market 129,000 - 110,000 = 19,000

Poor Market 0 - 310,000 = 310,000

Mid Sized Facility :

Good Market 550,000 - 300,000 = 250,000

Fair Market 129,000 - 1129,000 = 0

Poor Market 0 - 100,000 = 100,000

Small Facility :

Good Market 550,000 - 200,000 = 350,000

Fair Market 129,000 - 100,000 = 29,000

Poor Market 0 - 32,000 = 32,000

No Facility :

Good Market 550,000 - 0 = 550,000

Fair Market 129,000 - 0 = 129,000

Poor Market 0 - 0 = 0

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