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Bad White [126]
4 years ago
14

Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to

maturity of 6.00%. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $22.50 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market-value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs?
Business
1 answer:
spin [16.1K]4 years ago
4 0

Answer:

The difference between two WACC is 1.2%.

Explanation:

As we know that

WACC = Ke * Ve / (Ve + Vd (1-Tax))    +   Kd * Vd*(1-tax) / (Ve + Vd*(1-Tax))

Using the Book Value Method:

WACC =             14% *$65 / ($65m + $45m (1-40%))

                    + 6% *$45m*(1-.4) / ($65m + $45m (1-40%))

WACC = 10%  + 1.8% = 11.8%

<u>Using the market value method:</u>

Market Value of Common Stock = Common Shares * Market value per share

Market Value of Common Stock = 10 million * $22.5 per share = $225m

WACC =             14% *$225 / ($225m + $50m (1-40%))

                    + 6% *$50m*(1-.4) / ($225m + $50m (1-40%))

WACC = 12.35%  + 0.7% = 13%

The difference between two WACC is 1.2%.

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During his conference with Lynn, Michael listens carefully to Lynn's complaints about anything and everything, identifies and wr
Galina-37 [17]

Answer: Option C

Explanation: Whiner term is used for individuals, who have complaint about everything around them. In other words, these are the individuals who keeps complaining all the time and blame the situations for their failures.

In the given case, Lynn is complaining about everything and anything. Michael on the other hand wants to end the meeting with her by asking her to come back with solutions.

Thus, from the above we can conclude that Michael believes that Lynn is a whiner. He believes that she cannot be satisfied no matter what actions he take.

3 0
4 years ago
Christine has obtained a job pitching a product at a local state fair. Her job is to demonstrate cookware, highlighting its feat
alex41 [277]

Answer:

<h2>The answer in this case would be option d) given in the answer choices or It describes all the positive features of your product.</h2>

Explanation:

  • Under Consumer Value Proposition(CVP),one of the features of product or service selling constitutes an all benefit approach which involves providing concerned product or service to the customers or buyers without any comparison with other competitors or rivals in the market.
  • In this case, as Christine provides a comprehensive demonstration of her product usage or utilization to the customers or buyers,it basically reflects providence of relevant product knowledge or information about the product features and characteristics without any direct consideration or reference to the market competitors or rivals.
  • It is one of the common mechanisms under CVP to generate consumer attraction towards any particular product and thereby, enhance sales revenue and future profitability by increasing product sales
8 0
3 years ago
Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for
Ket [755]

Answer:

Accounting costs $145,000

Implicit costs $75,000

Opportunity costs $220,000

Explanation:

What her accounting cost will be during the first year of operation.

Based on the information given we were told that the annual overhead costs and operating expenses amounted to the amount of $145,000 which means that the amount of $145,000 will be the ACCOUNTING COSTS

Her IMPLICIT COSTS will be the amount of $75,000 which is the amount she earn in her current job per year.

Her OPPORTUNITY COSTS be the addition of both her Her accounting cost and implicit costs

Hence,

Opportunity cost=$145,000+$75,000

Opportunity cost=$220,000

4 0
3 years ago
Charlene has a monthly salary of $3,410. With her present budget, Charlene has a net income that is 7% of her monthly salary. Ch
Kipish [7]

Answer:

a. $113.70

Explanation:

The computation of the new net income is shown below:

= Monthly salary × net income percentage - reduced amount of net income per month

= $3,410 × 7% - $125

= $113.70

Hence, the corrected net income is $113.70

Therefore the correct option is a. $113.70

All other options are wrong hence ignored them

7 0
4 years ago
Bob and Rob have started a food delivery business together called Grub Galore in their college town. They have not incorporated
Neko [114]

Answer:

Partnership Business

Explanation:

Partnership business is a business enterprise owned, managed and financed by a minimum of two individuals for the purpose of making profit.

Grub Galore is owned by Bob and Rob which makes it a partnership business.

Advantages

1) Profit is shared by partners only.

2) It is financed by more than one person which makes capital more available.

3) Decision making is faster company to limited liability companies

Disadvantages

1) Loss is shared among partners only.

2) Death of one partner might lead to the end of the business.

3) Disagreement between partners might end the business.

5 0
3 years ago
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