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ludmilkaskok [199]
2 years ago
14

WACKO Ltd. has $30 million in debt, equity of $55 million, an after-tax cost of debt of 6 percent, a cost of equity of 9 percent

, and a tax rate of 25 percent. The firm's weighted average cost of capital (WACC) is ___%.
Business
1 answer:
Lady_Fox [76]2 years ago
6 0

Answer:

The firm's weighted average cost of capital (WACC) is 7.94%.

Explanation:

WACC is the weighted average cost of capital which is calculated on the sum of ratio of debt and equity in total funding. It is the average cost of each total capital employed in the business whether from equity or debt.

Total debt and Equity = 30 million + 55 million = 85 million

Weightage of Equity = 55 million / 85 million = 0.6471

Weightage of Debt = 30 million / 85 million = 0.3529

Cost of equity = 9% = 0.09

Cost of debt = 6% after tax = 0.06

Weighted Average Cost of Capital = (Cost of equity x weightage of capital) + ( cost of debt x weightage of debt )

Weighted Average Cost of Capital = ( 0.09 x 0.6471 ) + ( 0.06 x 0.3529 )

Weighted Average Cost of Capital = 0.05824 + 0.02117

Weighted Average Cost of Capital = 0.07941

Weighted Average Cost of Capital = 7.94%

* Ad cost of debt already given in terms of after tax so, there is no need to include the tax factor in WACC formula.

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A company purchased new equipment for $48,000. The company paid cash for the equipment. Other costs associated with the equipmen
brilliants [131]

Answer:

The cost recorded will be $53,400

Explanation:

In this question, we are to give the value of the amount recorded as the cost of the new equipment.

By simply doing some additions, we will be okay.

mathematically, this would be

Cost of equipment recorded = cost of equipment + transportation cost + sales tax + installation cost = 48,00 + 1,200 + 2,500 + 1,700 = $53,400

4 0
3 years ago
Which early farming tool removed the stalk and the grain from a husk of wheat? sickle scythe thresher mouldboard plow
tankabanditka [31]
A sickle because it was used during the Industrial Revolution
8 0
3 years ago
Read 2 more answers
The higher the firm's flotation cost for new common equity, the more likely the firm is to use preferred stock, which has no flo
kirill115 [55]

Answer:

B. False

Explanation:

Flotation costs are cost that are concerned with issuing new common stock. It is the amount of money or cost incurred by an organization when offering its securities to the public. The cost may include legal fees, auditing fees and registration fees. When the flotation cost goes higher, firms are more likely to use debts rather than preferred stock. This is simply because debt is lesser than both common stock and preferred stock. Also, its fallacy to think that preferred stock doesnt have flotation cost. Its only that its not as high as the ones for new common equity.

8 0
3 years ago
To test their theories, economists usually have to:____.
Vanyuwa [196]

Answer:

Confront theories predictions with evidence

Explanation:

To test economic theories, economists would observe real behavior and test it with data from the real world. Which would in turn provide evidence based on what is being tested. Confronting theories predictions with evidence is a pointer to the fact that economic theories are verifiable and their validity can be tested.

6 0
2 years ago
It takes Anne 3 hours to make a pie and 4 hours to make a shirt. It takes Mary 2 hours to make a pie and 5 hours to make a shirt
mina [271]

Answer:

False

Explanation:

An economic agent should specialise in the production of the good for which it has a comparative advantage in its production.

An economic agent has a comparative advantage in production if it produces at a lower opportunity cost when compared with other economic agents.

Anne's opportunity cost in pie production = 4/3=1.33

Anne's opportunity cost in shirt production = 3/4 = 0.75

Mary's opportunity cost in pie production = 5/2 = 2.5

Mary's opportunity cost in shirt production = 2/5 = 0.4

Anne has a comparative advantage in the production of pies and Mary has a comparative advantage in the production of shirts.

Anne should specialise in pie production and Mary should specialise in shirt production.

I hope my answer helps you

5 0
3 years ago
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