Answer:
23.08%
Explanation:
The computation of the debt ratio is shown below:
Debt amount
= 2 million × 0.90
= 1.80 million
And,
Equity amount
= 2 million × 3
= 6 million
Now
debt ratio = debt amount ÷ (amount of debt + amount of equity)
= 1.80 million ÷ ( 6 million + 1.80 million)
= 23.08%
False is the correct answer
Since there is no debt, all the capital that the company raises is in the form of common equity.
Since there is only equity (meaning the firm is a fully equity firm), the weighted average cost of capital (WACC) is nothing but the cost of equity
In this case the WACC represents the cost of equity
Therefore, cost of equity = WACC = 8%
Answer:
Foreign exchange loss
Explanation:
A foreign exchange gain/loss is normal for companies that operate in foreign countries. E.g. you prepared your financial statements by converting the foreign currency into your local currency, in this case you converted Canadian dollars to US dollars. But then the exchange rate between the currencies changes. If the value of the Canadian dollar's value increased after conversion, then you gained, and an adjustment must be made to show that gain. But if the Canadian dollar's value decreased after the conversion, then you lost (what happened here) and an adjusting entry must be made to report the loss.
In order to correct his, you must:
Dr Foreign exchange gain/loss 10
Cr Canadian bank account 10
