a.
WACC is calculated as –
WACC = (Weight of common stock X Cost of common stock) + (Weight of preferred stock X Cost of preferred stock) + (Weight of debt X After tax cost of debt)
WACC = (64% X 13.4%) + (9% X 6.4%) + (27% X ((1- 40%)*8.1%))
WACC = 10.46%
b. After tax cost of debt is calculated as –
After tax cost of debt = (1- tax rate) X cost of debt pre-tax
After tax cost of debt = ((1- 40%)*8.1%))
After tax cost of debt = 4.86%
Answer:
Explanation:
The computation is shown below:
Corporate tax = (Taxable income - bonus expenses) × corporate tax rate
= (925,000 - $153,000) × 21%
= $162,120
The corporate tax rate is 21% and we take the same for computation
Shareholder tax = Bonus expenses × marginal tax rate
= $153,000 × 35%
= $53,550
So, the total income tax would be equal to
= $162,120 + $53,550
= $215,670
It would be depending on how they filled out their tax forms before starting the job. Some people may have children to claim on their tax returns and some people may only be able to claim only theirself .
Answer: Thee Multiplier Process
Explanation:
The Multiplier Effect is the change in income that results from a change in Expenditure.
Essentially it is the rise in income resulting from new injections of money.
Broadly speaking, injections can come from, Government Spending in the Economy, Investment by firms, Exports and the like.
Injections increase the flow of income as the text portrays as it translates to money going into someone else's hands which they use to do something that enables someone else to get paid and so on and so forth.
That is what happened in the text.
Mary got an injection from the US Government, this enabled a salesman to go on a date, which enables a Ballerino his rent .
An injection of extra income leads to more spending, which creates more income, and so on.
If you require further clarification do react or comment.
