Which of the following statements about the admission process is FALSE?

Design Interiors has a cost of equity of 14.9 percent and a pretax cost of debt of 8.6 percent. The firm's target weighted avera

Savatey [412]

Answer:

0.73

Explanation:

Given that

WACC = 11%

Tax rate = 34%

Cost of equity = 14.9 %

Cost of debt = 8.6%

Recall that

WACC = (cost of equity × % of equity) + (cost of debt × % of debt) + ( 1 - tax rate)

We are to find

Cost of debt and cost of equity

Let

Cost of debt be x

Cost of equity be (1 - x)

Thus,

0.11 = (1 - x)(0.149) + (x)(0.086)(1 - 0.34)

x = 0.4228

Therefore,

Debt-equity ratio

= Cost of debt/cost of equity

= 0.4228/(1 - 0.4228)

= 0.73

4 0

3 years ago

Read 2 more answers

Which sentence from the contract shown below refers to consideration?

mamaluj [8]

first party is the one that I would do

4 0

3 years ago

Stephen runs a pet salon. He is currently grooming 130130 dogs per week. If instead of grooming 130130 dogs, he grooms 131131

borishaifa [10]

Answer:

Profit will increase by $2.3

Explanation:

Data provided in the question:

If instead of grooming 130130 dogs, he grooms 131131 dogs

Marginal cost = $65.82

Marginal revenue = $68.12

Now,

The effect on his profits of grooming 131 dogs instead of 130 dogs will be:

Change in profit = Marginal revenue - Marginal cost

or

Change in profit = $68.12 - $65.82

or

Change in profit = $2.3

Hence,

Profit will increase by $2.3

7 0

3 years ago

The following events occurred for Favata Company: a. Received $10,000 cash from owners and issued stock to them. b. Borrowed $7,

Marina86 [1]

Answer:

(a)

Increase in Cash of $10,000 and Increase in Common Stock account of $10,000

Asset increases by $10,000; Owner's equity increases by $10,000. Accounting equation remains in balance.

(b)

Increase in Cash of $7,000 and Increase in Short-term Note Payable account of $7,000

Asset increases by $7,000; Liability increases by $7,000. Accounting equation remains in balance.

(c)

Increase in Fixed Asset of $800 and Increase in Account Payable account of $800

Asset increases by $800; Liability increases by $800. Accounting equation remains in balance.

(d)

Increase in Fixed Asset of $12,000, Decrease in Cash of $1,000 and Increase in Long-term Note Payable account of $11,000

Asset increases by $11,000; Liability increases by $11,000. Accounting equation remains in balance.

(e)

Increase in Fixed asset of $3,000, Decrease in Cash of $1,000 and Increase in Account Payable account of $2,000

Asset increases by $2,000; Liability increases by $2,000. Accounting equation remains in balance.

Explanation:

Explanation is given in Answer part

6 0

3 years ago

You own a coal mining company and are considering opening a new mine. The mine will cost $120 million to open. If this money is

GalinKa [24]

Answer: B. There are two IRRs so you cannot use the IRR as a criterion for accepting the opportunity.

Explanation:

The Internal Rate of Return can be useful in capital budgeting to enable a company know if an investment will be profitable. It is defined as the discount rate that causes the Net Present Value(NPV) to be zero. If the IRR is greater than the required return then the project should be accepted as it will have a profitable NPV.

IRR has some problems however and one of them is reflected here. There can sometimes be two IRRs and when this happens, using IRR as a viability measure cannot be done because a single rate is needed for comparison with the required return.

4 0

3 years ago