1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Andrew [12]
3 years ago
10

"Big Burger has 100,000 shares of common stock outstanding at a market price of $40 a share. There are 10,000 shares of 8 percen

t preferred stock outstanding at a market price of $30 a share. The firm has 1000 bonds outstanding with a face value of $1,000 and a market price of $960. The firm’s tax rate is 34 percent. What weight should be assigned to the cost of common stock when computing the weighted average cost of capital?"
Business
1 answer:
oksano4ka [1.4K]3 years ago
6 0

Answer:

weight % of equity = 76.05%

weight % of preferred stock = 5.70%

weight % of debt  = 18.25%

Explanation:

calculation for equity:

total number of equity is 100,000

market price of stock = 40

so total value of stock = 40 × 100,000 = 4,000,000

calculation for preferred stock:

total number of share is 10,000

market price of stock = 30

so total value of stock = 30 × 10,000 = 300,000

calculation for debt:

total number of bond is 1,000

market price of  bonds = 960

so total value of stock = 960 × 1,000 = 960,000

total value = 4,000,000 + 300,000 + 960,000 = 5,260,000

Calculation of weight percentage

weight % of equity  =\frac{4,000,000}{5,260,000} = 0.7604 = 76.04%

weight % of preferred stock   = \frac{300,000}{5,260,000} = 0.0570 = 5.70%

weight % of debt  = \frac{960,000}{5,260,000} = 0.1825 = 18.25\%

You might be interested in
How can I convince a friend to invest in a good manner
Arada [10]

Answer:

you can try your frend to sand gift on mobile

4 0
2 years ago
Read 2 more answers
If you know how to think critically and have excellent problem solving skills, you are said to have strong
Ugo [173]

Answer:

B

Explanation:

its right

7 0
3 years ago
Give an example of a situation in which a surplus of a product led to decreased prices. similarity, give a example of a situatio
andrew11 [14]

Answer:

Give an example of a situation in which a surplus of a product led to decreased prices. similarity, give a example of a situation in which a shortage led to increased prices. what eventually happened in each case? why?

In the course of having surplus of a product which decreases the price, this happens as a result of high competition as there many people selling the same products which in turns leads to crash in price in order to make sales and little profit.

while product shortage or scarcity happens as a result of decrease in resources or decrease in supply, hence; results into scarcity of products which eventually aids increment of price

Explanation:

3 0
3 years ago
Miltmar Corporation will pay a year-end dividend of $5, and dividends thereafter are expected to grow at the constant rate of 4%
morpeh [17]

Answer:

a. 10.04%

b. $82.78

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

a. Expected rate of return or market capitalization = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

= 5% + 0.72 × (12% - 5%)

= 5% + 0.72 × 7%

= 5% + 5.04%

= 10.04%

The Market rate of return - Risk-free rate of return) is also known as the market risk premium and the same is applied.

b. Now the intrinsic value would be

= Expected dividend ÷ (Required rate of return - growth rate)  

= $5 ÷ (10.04% - 4%)

= $5 ÷ 6.04%

= $82.78

7 0
3 years ago
One of the draw backs of the profitablity index as a criteria for judging whether to accept a capital investment project is that
Naya [18.7K]

Answer:

It might lead to over-optimistic projections

Explanation:

In simple words, the problem with using profitability index as the index criteria lies with the procedure of estimating it. In order to consider the business situation, the organisational finance group requires to settle with the corporation supervisors.

Leadership may be too enthusiastic about their assignment, so forecasts for cash flow may be too substantial. Consequently, in predicting the profitability index, there may be an uptrend prejudice.

3 0
3 years ago
Other questions:
  • Find last​ year's salary​ if, after a 4% pay​ raise, this​ year's salary is $39,000.
    5·1 answer
  • In the context of international trade, a small country is one that:
    11·1 answer
  • A department store uses a perpetual inventory system. At year-end, the balance in the merchandise inventory account is $2 millio
    11·1 answer
  • Which of the following is prepared​ last? A. Balance Sheet B. Statement of​ Owner's Equity C. Trial Balance D. Income Statement
    5·1 answer
  • Courtney recently ordered a few books online. However, she received the wrong order. She was completely dissatisfied and returne
    5·2 answers
  • Describe a real or made up but realistic example of earned income that you or someone you know has received. What type of work w
    15·1 answer
  • When an F5 (category 5) tornado hit a town in southern Missouri, the people that lived there needed the basics: food, water, and
    10·1 answer
  • The following transactions occurred in April at Steve’s Cabinets, a custom cabinet firm: Purchased $80,000 of materials on accou
    14·1 answer
  • General Motors (GM) is trying to reinvent the Cadillac brand with new car designs and a new brand story. They commission McCann
    15·1 answer
  • How publish Fiverr gig without taking a test?
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!