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Lera25 [3.4K]
3 years ago
15

The following information comes from the Galaxy Construction balance sheet. The value of common stock is​ $10,000, retained earn

ings equals​ $7,000, total common equity equals​ $17,000, preferred stock has a value of​ $3,000, and longminusterm debt totals​ $15,000. If the cost of debt is​ 8.00%, preferred stock has a cost of​ 10.00%, common stock has a cost of​ 12.00%, and the firm has a corporate tax rate of​ 30%, calculate the​ firm's WACC adjusted for taxes.A.​10.11%B.​9.09%C.​10.00%D.There is not enough information to answer this question.
Business
1 answer:
Setler [38]3 years ago
8 0

Answer:

The WACC is 9.09% and option B is the correct answer.

Explanation:

The WACC or the weighted average cost of capital is a firm's average cost of its capital structure that comprises of debt, preferred stock and common equity. The formula fro WACC is,

WACC = wD * rD * (1-tax rate)  +  wP * rP  +  wE * rE

Where,

  • wD, wP and wE represents the weightage of debt, preferred stock and common stock in the capital structure or as a proportion of total assets
  • rD, rP and rE represents the cost of debt, preferred stock and common stock
  • We take the after tax cost of debt. So, rD is multiplied by (1- tax rate)

Total Assets = 17000 + 3000 + 15000 = 35000

Taking out these values in thousands for simplicity.

WACC = 15/35 * 0.08 * (1-0.3)  +  3/35 * 0.1  +  17/35 * 0.12

WACC = 0.09085 or 9.085% rounded off to 9.09%

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In 2019, Winn, Inc. issued $1 par common stock for $35 per share. No other common stock transactions occurred until July 31, 202
Vadim26 [7]

Answer:

b. <em> </em>Additional paid-in capital is decreased

Explanation:

The entry to record acquisition and retirement is:

                                                                 Debit          Credit

Common stock                                           $1  

Paid-in capital—excess of par                  $34  

   <em> Paid-in capital—share repurchase                        $5</em>

    Cash                                                                  $30

<em>Conclusion: </em>Additional paid-in capital is decreased.  

7 0
3 years ago
The management of Firebolt Industries Inc. manufactures gasolineand diesel engines through two production departments, Fabricati
GalinKa [24]

Solution:

Single factory overhead amount: the amount at which plant overheads or processing overheads are assigned to goods is referred to as single plant overhead rate.

Formula to measure a single plant-wide overhead rate:

Single plant-wide overhead rate :

\frac{Total budgeted factory overhead}{ Total budgeted plant-wide allocation base}  

Different development team overhead rate: this distribution system describes the various divisions engaged in the manufacturing cycle. Factory overheads are assigned to goods on the basis of the overhead cost for each of the manufacturing units.

Formula for calculating various output department overhead:

Multiple production department overhead rate:

\frac{ Budgeted department factory overhead}{ Budgeted department factory overhead}

For calculate: single plant-wide overhead rate use direct working hours (DLH) as the allocation basis, and measure factory overhead.

Using DLH as the allocation basis to measure a single plant-wide overhead limit.

Single plant-wide overhead rate :  \frac{Total budgeted factory overhead}{ Total budgeted plant-wide allocation base}

                                                     = \frac{80,000}{10,000 DLH}

For calculate: single plant-wide overhead rate use direct working hours (DLH) as the allocation basis, and measure factory overhead.

Using DLH as the allocation basis to measure a single plant-wide overhead limit.

4 0
3 years ago
Pedro sells investment land on September 1, 2019. Information pertaining to the sale follows: Adjusted basis $25,000 Selling pri
bearhunter [10]

The tax consequence in 2019 is $10584 while the tax consequence from 2020 to 2023 will be $13229.

Bases on the information given, the realized gain will be:

= $90000 - $25000 - $1500

= $63500

The gross profit percentage will be:

= 63500/(90000 - 18000) × 100

= 63500/72000 × 100

= 88.19%

The tax consequence in 2019 will be:

= $12000 × 88.19% = $10584

The tax consequence in 2020 will be:

= $15000 × 88.19% = $13229

The tax consequence in 2021 will be:

= $15000 × 88.19% = $13229

The tax consequence in 2022 will be:

= $15000 × 88.19% = $13229

The tax consequence in 2023 will be:

= $15000 × 88.19% = $13229

Read related link on:

brainly.com/question/25301019

8 0
3 years ago
Which is one of the best ways to avoid credit problems​
liq [111]

paying your bills on time if not your credit will go down

8 0
3 years ago
Year cash flow 0 –$ 32,500 1 14,300 2 17,400 3 11,700 required: what is the irr of the above set of cash flows?
valina [46]
IRR = 15.76% i got that as my answer


4 0
3 years ago
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