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Ksju [112]
3 years ago
15

Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its befor

e-tax cost of debt is 8%, and its marginal tax rate is 40%. The current stock price is P0 5 $22.00. The last dividend was D0 5 $2.25, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?
Business
1 answer:
Arturiano [62]3 years ago
4 0

Answer:

Cost of common equity is 15.7%  and WACC is 7.2%

Explanation:

D1 is  

D1= 2.25 (1+0.05)

The cost of common equity is  

Rs = 2.36/ 22.00 + 5% =0.157= 15.7%

The cost of common equity is weighted average cost of capital (WACC)  

WACC = (0.35) * (0.08) (1- 0.40) + 0 preferred stock+ (0.35) * (0.157)

WACC = 0.03 *0.6 + 0 + 0.054

WACC = 0.018 + 0.054

WACC = 7.2%

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Alma owns fifty shares of common stock in Alpha Corporation. Alma also owns eighty shares of preferred stock in the same corpora
andreyandreev [35.5K]

Given the situation described above, Alma will be able to cast <u>50 votes</u>.

This is because common stock gives voting rights to shareholders. And given that Alma has 50 shares of common stocks. Therefore, he would be able to cast 50 votes.

On the other hand, preferred stocks give no voting rights to shareholders.

However, preferred shareholders have preference over a company's revenue or earnings, which implies that they are paid dividends before common shareholders.

Hence, in this case, it is concluded that the correct answer is "50 votes."

Learn more here: brainly.com/question/3518273

3 0
2 years ago
Select the correct answer. Which actions should a company take if its product/brand falls under the BCG Matrix category of “dog”
andriy [413]

Answer:

A

Explanation:

While dealing with a DOG situation, it is  best to disinvest  in the product and focus on other products with greater market potential

7 0
3 years ago
Relevant costs for target costing include:
Firdavs [7]

Answer:

Correct answer is D. All future costs, both variable and fixed

Explanation:

In target costing, all future costs both variable and fixed costs are relevant. This is for us to clearly determine the desired profit that the company wants to attain. The process of costing is to determine all future costs that the company will possibly incur in the production and add it to the desired profit margin to know the unit sales price of the product.

5 0
3 years ago
How does demand-pull inflation differ from cost-push inflation?
kicyunya [14]
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4 0
3 years ago
Read 2 more answers
Donata Company purchased equipment for $30,000 in December 20x1. The equipment is expected to generate $10,000 per year of addit
attashe74 [19]

Answer:

Total after-tax cash flow= $6000

Explanation:

Giving the following information:

Equipment value= $30,000 in December 20x1.

Income= $10,000 p

Cost= $2,000 per year.

Depreciation= $3,000.

t=0,40

Cash flow has the following structure:

Income (+)

Cost (-)

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=EBIT

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Depreciation (+)

Total

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Tax= -2000

Depreciation= 3000

Total= 6000

5 0
3 years ago
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