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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%

         

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nata0808 [166]

Answer:

$200 (a deduction)

Explanation:

The accounting standard for inventories IAS 2 requires that inventory be carried at the lower of cost or net realizable value. Inventory will initially be recognized at the cost ( which includes the cost of the item and other associated cost such as freight ). However, its carrying amount must be reviewed to ensure it is not higher than the realizable value.

Given that the selling price is now $15 which is lower than the cost of $16, it means that the amount that can be realized from the sale of a unit is $15.

= $16 - $15

= $1

As such, an adjustment in form of a reduction of the carrying amount of $1 per unit is required. The amount of the lower cost of market adjustment the company must make as a result of this decline in value

= $1 × 200 units

= $200 (a deduction)

8 0
3 years ago
ABC Mechanics charges an estimate fee of $100 plus $40 per hour, x, in labor. XYZ Mechanics charges an estimate fee of $65 plus
Dima020 [189]

Answer:

5 hours  would work! Hope it helps!

Explanation:

100 off top!

40 in labor for each hour

40 times 5 is 200

so that would cost 300

for xyz

65 off top and 50 in labor for each hour

5 times 50 is 250

250 plus 65 is 315 !

7 0
3 years ago
Assuming bourne reported $50,000 of nonrecaptured net §1231 losses during years 1–5, what amount of bourne's net §1231 gain for
Novosadov [1.4K]
<span>The Menendez family has a net income of $4,500. The chart shows their cost-of-living percentages. How much do they spend on transportation?</span>
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Are you dreaming of buying your own car, visiting a new city or learning a language— but aren’t sure how to get there? The key t
Alekssandra [29.7K]

Answer:

The steps to reaching your goals are:

Step 1: What is your goal?

Step 2: What is your why?

Step 3: What will it cost you?

Step 4: What is your action plan?

Step 5: How will you stick to the plan?

Explanation:

Step 1: What is your goal?

You have to be clear on what you want. Take for instance, you dream of buying your own car, write it down.

Step 2: What is your why?

State reasons why you need a car of your own. Is it for business runs or to aid your movement? you have to specify all the reasons.

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Step 4: What is your action plan?

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Step 5: How will you stick to the plan?

Give yourself targets according to your action plan and put yourself in check to ensure that you stick to the plan.

5 0
4 years ago
You own a computer company, and you launch a joint venture with a competitor to create a new super-speed tablet. Unfortunately,
Harlamova29_29 [7]

Answer:

Failing to analyze and take into account the competitor technological environment.

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When initiating a new joint venture, a company must analyze many environments, such as cultural, organizational, financial, technological, processual, and others. In this case, it was necessary to analyze the current technological competitor environment to check the compatibility of operating systems and the cost and viability of adjusting accordingly. Nothing was done, hence the joint venture’s failure.  

4 0
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