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
Anna11 [10]
3 years ago
11

David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity on the company's outstanding

bonds is 12%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 11.54%. What is the company's cost of equity capital? Round your answer to two decimal places.
Business
1 answer:
Marrrta [24]3 years ago
8 0

Answer:

Cost of equity = 14.43%

Explanation:

Weigheted Average cost of capital is computed using the formula below:

WACC = (Wd×Kd)  + (We×Ke)

           Kd= aftre tax cost of debt= 12%× (1-0.4)= 7.2%

           Wd =Proportion of debt= 40%

           We = proportion of equity = 60%

            Ke= cost of equity.

let the cost of equity be "y"

WACC = 11.54

11.54 = (40%× 7.2%) + (60% × y)

0.1154  = 0.0288 + 0.6y

0.1154 - 0.0288 = 0.6y

y =(0.1154 - 0.0288)/0.6

y = 0.1443 × 100

y =14.43%

Cost of equity = 14.43%

         

You might be interested in
Employee a. who executes orders to buy and sell for clients of his or her brokerage firm. b. individual who trades on the floor
LUCKY_DIMON [66]

Answer:

In the given context, the correct definition for an employee, would be that of an individual who executes orders to buy and sell for clients of his or her brokerage firm.

Explanation:

An employee is a person who is hired by an employer to execute functions that are necessary to his organization's full operation. In the context of the stockmarket, an employee of a company would not trade for his or her account, but for his employer's account, following their policies and intentions. Therefore,  an employee is an individual who executes orders to buy and sell for clients of his or her brokerage firm.

8 0
3 years ago
A few years ago, Toyota found that consumers wanted cars to last longer and be more environmentally friendly. GM, however, enjoy
Allushta [10]

Answer:

General Motors had more of a Production Orientation

Explanation:

The company which is production oriented focuses on the production and company's production processes and runs campaigns to sell the product produced or the product they are producing. General motors produced the products which it is good in producing the products and won the market against great giants like Ford, Toyota and German auto companies. Whereas Toyota was developing market which is newly born and started pricing their products on the basis of products that were desired (environmentally friendly products) and lost the market because of lost of market share as this market was in introduction phase and Toyota left a market which was at maturity. Then it is obvious that Toyota has revenue losses due to leaving its concentration and marketing of products to mature market and was busy in developing environmentally free products market in US.

7 0
3 years ago
A salesperson earns $350.25 per week plus 12% of her weekly sales. Which of the following describes the sales necessary for the
Natali5045456 [20]
The equation for problem above is:
350.25+12/100*x=800.5
12/100*x=800.5-350.25
12/100*x=450.25
12x=45025
x=45025/12=3752.08

But the question is "at <span>least" $800.50 so the final answer is

</span>x \geq 3752.08<span>
</span>
3 0
3 years ago
Management at WorkNewspapers are under tremendous pressure to stay relevant as people increasingly turn to the Internet for news
kap26 [50]

Answer:

B. Subscribers cancelling their subscriptions

Explanation:

Central Times’s business environment had suffered tremendousy in recent times with transition from newspaper publication to online journalism. As a result of this, Time's publishing company has faced many problems some of which are highlighted below: many of the newspaper subscribers have cancelled their subscription, they were losing revenue, they had to relief a third of their reporting staff primarily. However, amidst all these, <u>the primary cause of disruption to Central Times’s business environment is option B</u> (Subscribers cancelling their subscriptions). It was this problem that led to the other problems (loss of revenue, firing a third of their reporting staffs)

7 0
3 years ago
In communication, feedback is a
docker41 [41]
Feedback is when you give a person a thought of how they did something like if you read me a novel I would tell you what you need to improve and what I liked or disliked.
7 0
3 years ago
Read 2 more answers
Other questions:
  • Marcie and her husband, Franklin, each own 50 shares of Chestnut, Inc. Sally, Marcie's old high school friend, owns the remainin
    14·1 answer
  • Brian wants to buy a mare that he can breed to help develop a horse operation. Larson offers to sell Brian a horse that Larson b
    12·1 answer
  • The set of business activities that adds value to products and services sold to consumers for their personal or family use is re
    8·1 answer
  • A natural history museum borrows $2,000,000 at simple annual interest to purchase new exhibits. some of the money is borrowed at
    5·1 answer
  • Per capita GDP is the most practical way to:
    8·1 answer
  • The Bridal Gift Shop Company has 12 units in ending merchandise inventory on December 31. The units were purchased in November f
    10·1 answer
  • Work that totals less than forty hours per week is considered _____ work.
    11·1 answer
  • Sean, Pete, Tom, and Mark formed a partnership to start a water damage restoration business. Each partner has a 25% interest, an
    9·1 answer
  • Assume that Corn Co. sold 7,600 units of Product A and 2,400 units of Product B during the past year. The unit contribution marg
    8·1 answer
  • State the difference between selection and recruitment.
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!