Answer:
a. 6.56%
b. 10.62%
Explanation:
Debt-equity ratio=debt/equity
Hence debt=1.2 equity
Let equity be $x
Debt=$1.2x
Total=$2.2x
WACC=Respective costs*Respective weight
a.
8.7=(x/2.2x*13)+(1.2x/2.2x*Cost of debt)
8.7=5.909+(1.2/2.2*Cost of debt)
Cost of debt=(8.7-5.909)*(2.2/1.2)
=5.1167%(Approx)
Hence pretax cost of debt=Cost of debt/(1-tax rate)
=5.1167/(1-0.22)=6.56%(Approx).
b.
8.7=(x/2.2x*Cost of equity)+(1.2x/2.2x*7.1)
8.7=(1/2.2*Cost of equity)+3.8727
Cost of equity=(8.7-3.8727)*2.2
=10.62%
Hello!
Time interest earned ratio=income before tax and interest expenses÷interest expenses
3=X÷40000
Solve for x
X=3×40000
X=120000 This is income before tax and interest expenses but we need to figure out earning before tax only as required so
Earning before tax=120,000−40,000
=80,000. Answer
Good luck!
Hello, I’m a guy and imma tell you this, you really do need one if your on this site trying to get one. Not to be mean
Answer: <u><em>A college student starts a part-time tutoring business is not an example of a barrier to entry.</em></u>
This is not an example of barrier to entry since in this particular case others students can easily utilize the same opportunity and enter into this particular business. In this case there is no legal barriers so that others cannot enter or exit into this industry or business.
<u><em></em></u>
<u><em>Therefore the correct option is (d).</em></u>
Answer: $70
Explanation:
Price = Present value of year 1 dividend + Present value of year 2 dividend + Present value of year 3 dividend + Present value of year 4 dividend + Present value of year 4 price
Year 4 price = Year 4 dividend / ( Required return - Growth rate after 3 years)
= (3.50 * 1.30³ * 1.04) / (13% - 4%)
= $88.856
Price = (3.50 / (1 + 13%)) + ( (3.50 * 1.3) / 1.13²) + ( (3.50 * 1.3²) / 1.13³) + ( (3.50 * 1.3³) / 1.13⁴) + 88.856/1.13⁴
= $69.97
= $70
