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alexira [117]
3 years ago
11

Oval Inc. just paid a dividend equal to $1.50 per share on its common stock, and it expects this dividend to grow by 4 percent p

er year indefinitely. The firm plans to issue common stock, which has a $16 per share market price, to raise funds to support operations. Oval's investment bankers estimate that the flotation costs for new issues of common stock will be equal to 8 percent of the issue (market) price. What is Oval's cost of new common equity, re?a.13.38%b.10.60%c.8.76%d.18.55%e.14.60%
Business
1 answer:
Rainbow [258]3 years ago
8 0

Answer:

e. 14.60%

Explanation:

The computation of Oval's cost of new common equity is shown below:-

Price of stock = Estimated dividends for next period ÷ (Required rate of return - Growth rate)

Dividend =  $1.50 × (1 + 4%)

= $1.56

Price of stock would be the price net of flotation cost

= $16 × (1 - 8%)

= $14.72

Required rate of return

= (1.56 ÷ 14.72) + 0.04

= 14.60%

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If interest rates are declining, which of the following would be expected? (A) Discount bonds will appreciate more than premium
KengaRu [80]

Answer:

option A

Explanation:

The correct answer is option A.

When interest rates are declining , prices of the bond rise, but in this case the discount bonds will appreciate more than the premium bonds.

When interest rates fall  it becomes very easier to borrow money and causing many companies to issue new bonds so that they can invest in new ventures.

A premium bond is a bond trading above its face value.

A bond issued at a discount has its market price below the face value.

5 0
3 years ago
Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect co
Viktor [21]

Answer:

(A) $144,000.

Explanation:

For computing the indirect costs allocated to the Commercial Department first we have to compute the per unit cost which is shown below:

Per unit cost = (Allocated department overhead indirect cost) ÷ (total number of direct labor hours)

=  $396,000 ÷ 22,000

= $18

The total number of direct labor hours = Consumer + commercial

                                                                = 14,000 + 8,000

                                                                = 22,000

Now the indirect cost equal to

= Per unit cost × Commercial direct labor hours

= $18 × 8,000

= $144,000

4 0
3 years ago
A ________ produces goods in advance of customer demand using a forecast of sales and moves them through the supply chain to poi
adoni [48]

Answer:

C.) Push System.

Explanation:

3 0
3 years ago
Examples of the ability to exercise significant influence over an investee include all of the following except:material intercom
ra1l [238]

Answer:

The correct answer is All of these answer choices are examples of significant influence.

Explanation:

Participatory influence implies a higher level of decision within an investee, without having maximum control over it. These decisions are framed within the financial and operating result, so all response options are true. According to the IFRS standard, this type of participation can be exercised in different ways, but the most common is within the highest decision-making body of the entity.

3 0
3 years ago
At the beginning of June, Bezco Toy Company budgeted 5,000 toy action figures to be manufactured in June at standard direct mate
Snowcat [4.5K]

Answer:

Instructions are below.

Explanation:

Giving the following information:

<u>Standard quantity:</u>

Direct materials (pounds)= 50,000/4= 12,500 pounds

Direct materials (pounds)= 12,500/5,000= 2.5 pounds per unit

Direct labor (hours)= 36,000/18= 2,000 hours

Direct labor (hours)= 2,000/5,000= 0.4 hours

A<u>ctual quantity:</u>

Actual direct materials= (49,600/4)= 9,920 pounds

Actual direct labor= 34,020/18= 1,890 hours

Production= 4,850

T<u>o calculate the direct labor quantity variance, we need to use the following formula:</u>

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Standard quantity= 2.5*4,850= 12,125

Direct material quantity variance= (12,125 - 9,920)*4

Direct material quantity variance= $8,820 favorable

<u>To calculate the direct labor time variance, we need to use the following formula:</u>

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Standard quantity= 0.4*4,850= 1,940

Direct labor time (efficiency) variance= (1,940 - 1,890)*18

Direct labor time (efficiency) variance= $900 favorable

8 0
3 years ago
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