If the price of labor or some other variable resource decreases, the:

Kuhn company is considering a new project that will require an initial investment of $4 million. It has a target capital structu

patriot [66]

Answer:

b. 9.00%

Explanation:

For the computation of WACC first we need to follow some steps which is shown below:-

Step 1

Cost of debt = 5.48% which is explained with the help of attachment.

Given that,

Present value = $1,555.38

Future value or Face value = $1,000

PMT = 1,000 × 11% = $110

NPER = 15 years

The formula is shown below:

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

So, after applying the above formula, the cost of debt is

Step 2

Cost of preferred stock = Annual preferred dividend ÷ Price

= $8 × $92.25

= 0.086721

Step 3

Cost of equity = Dividend ÷ (Stock price × (1 - flotation cost)) + Growth rate

= 2.78 ÷ (33.35 × (1 - 0.08)) + 0.092

= 18.26%

WACC = Weight of debt × Cost debt) + (Weight of preference stock × Cost of preference stock) + (Weight of equity × cost of equity)

= (0.58 × (0.0548 × (1 - 0.4)) + (0.06 × 0.086721) + (0.36 × 0.1826068)

= 9.00%

6 0

3 years ago

Annuity A requires annual contributions over 5 years and pays 5% annual interest. Annuities B and C have the same interest rate

valentina_108 [34]

Answer:

A. Annuity C

Explanation:

we can use the present value of an ordinary annuity formula to determine the annual contributions:

FV annuity factor, 5%, 5 periods = 5.5256

FV annuity factor, 5%, 10 periods = 12.578

FV annuity factor, 5%, 30 periods = 66.439

annual contribution annuity A = $50,000 / 5.5256 = $9,048.79, total annuity payments = $45,243.95, so accumulated interests are $4,756.05

annual contribution annuity B = $50,000 / 12.578 = $3,975.19, total annuity payments = $39,751.90, so accumulated interests are $10,248.10

annual contribution annuity C = $50,000 / 66.439 = $752.57, total annuity payments = $22,577.10, so accumulated interests are $27,422.90

8 0

3 years ago

At the end of 2003, Ritzcar Co. fails to accrue sales commissions earned during 2003, but paid in 2004. The error is not repeate

Mandarinka [93]

Answer:

The effect of this error on 2003 ending working capital is that it overstated the ending 2003 working capital.

The error does not have effect on the 2004 ending retained earnings balance.

Explanation:

Let the amount of the commission expense be xxxx.

At the end of 2003, the journal entries should have been as follows:

Debit Commission expense for xxxx

Credie Commission payable for xxxx

Also, we have:

Working capital = Current assets – Current liabilities ………… (1)

From equation (1), current liabilities are understated because commission payable which was not recorded is an item under current liabilities. Since the current liabilities are understated, that indicates that the working capital in equation is overstated. Therefore, the effect of this error on 2003 ending working capital is that it overstated the ending 2003 working capital.

When the 2003 commission expense in the entries above was paid in 2004, it would have been recognized as an expense. This made the error to counterbalance. This implies that the 2004 ending retained earnings balance is still correct despite that there are errors in the earnings of the two years. Therefore, the error does not have effect on the 2004 ending retained earnings balance.

4 0

3 years ago

1. Mr. C, a self-employed consultant, uses a room of his home as a business office. This room represents 10 percent of the home’

GaryK [48]

Answer:

Mr. C

Home office deduction for the year is:

= $20,405.50

Explanation:

Qualifying home office expenses:

Home mortgage interest $12,980

Property tax on residence 2,200

Homeowner’s insurance 1,475

Utilities 2,100

Furnace repairs 300

Depreciation on building 185,000

Qualified home expenses $204,055

10% for home office = $20,405.50

b) Mr. C is entitled to deduct home office expenses relating to mortgage interest, insurance, utilities, repairs, and depreciation, including furnace repairs. The deductions for a home office are based on the percentage of Mr. C's home devoted to his business use.

5 0

3 years ago

he following information pertains to Benedict Company. Assume that all balance sheet amounts represent average balance figures.T

ra1l [238]

Answer:

b. 14.0%

Explanation:

NET INCOME

Sales $ 100.000

Net Income $ 25.000

Preferred Stock -$ 4.000

Net Income to Stockholders' equity—common $ 21.000 14%

Net Income to Stockholders $ 21.000

=========== = 14%

Stockholders' equity—common $ 150,000

5 0

3 years ago