1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
erastovalidia [21]
3 years ago
5

Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity

on the company's outstanding bonds is 10%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 13.00%. What is Pearson's cost of common equity
Business
1 answer:
stiks02 [169]3 years ago
7 0

Answer:

0.175  or 17.5%

Explanation:

The calculation of the cost of common equity is shown below:-

WACC = Weight of Equity × Cost of Equity + Weight of Debt × ( 1- Tax rate) × Cost of Debt

0.13 = (0.55 × Cost of equity) + ((0.45 × (1 - 0.25) × 0.10)

0.13 = (0.55 × Cost of equity) + 0.045 × 0.75

(0.55 × Cost of equity) = 0.13 - 0.03375

(0.55 × Cost of equity) = 0.09625

Cost of equity = 0.09625 ÷ 0.55

= 0.175

Therefore for computing the cost of equity we simply applied the above formula.

You might be interested in
Can someone explain the relationship between consumer expectations and economic performance?
maks197457 [2]
If a consumer believes that the price of the good will be higher in the future he is more likely to purchase the good now. If the consumer expects that her income will be higher in the future the consumer may buy the good now. In other words positive expectations about future income may encourage present consumption.
5 0
3 years ago
During a management meeting, Lester, the CEO of Elite Office Equipment, reminded his management team of where the company wants
REY [17]

Answer: Vision statement

Explanation:

Vision statement is referred to as or known as an organization's road map, which tends to indicate what the organization believes to become and achieve by putting forth a well defined direction and route for the organization's growth. These statements usually undergo the minimal revisions throughout the lifetime of an organization, unlike the operational goals that might be revised on yearly basis.

7 0
3 years ago
can frictional unemployment by itself explain the fact that the late 2010s saw more job openings than unemployed workers
neonofarm [45]

Answer:

Frictional unemployment cannot by itself explain the fact that the late 2010s saw more job openings than unemployed workers.

Instead, frictional unemployment points to the fact that some people are unemployed because they are just entering the labor market for the first time after a long period of absence.

Explanation:

As a part of natural unemployment, frictional unemployment arises when workers search for new jobs or transition from one job to another.  During economic recession, there is no increase in frictional unemployment.  Typical examples of frictional unemployment are caused by graduating students who join the labor force and are unemployed until they find work and parents who rejoin the workforce after taking sometime to stay at home and raise their children.

4 0
2 years ago
Whole grain breads, bagels, bread sticks, sandwiches, soup, and pastries are products that would be included in the product mix
VashaNatasha [74]
This is a True statement.
6 0
3 years ago
A regressive tax has the biggest impact on which sector of the american economy?
9966 [12]
A regressive tax has the biggest impact on the income of the middle-sector households. of the American economy because they are affected by the increase of the average tax rate. The regressive tax gets its large percentage from the middle sector than the high-class households with high earnings.
7 0
3 years ago
Other questions:
  • "The members of a marketing department are having a meeting. There is a lot of disagreement over the content of the next adverti
    14·1 answer
  • Assume December 31 is a Wednesday. Weld-Rite Company’s wages are paid every Friday, and the weekly payroll (for five days) amoun
    12·1 answer
  • In order to lose weight, energy expenditure must exceed energy intake. negative energy balance occurs when the body is using mor
    14·1 answer
  • Ethisphere is a socially conscious research organization that analyzes and reports on corporate social responsibility efforts. T
    13·1 answer
  • The _____ perspective on management consists of the systems, contingency, and quality-management viewpoints.
    14·1 answer
  • In the face of demographic pressures dealing with an aging workforce, many employers try to use _____ among their older workers
    7·1 answer
  • Which of the following is NOT an accurate description of modern marketing?
    7·1 answer
  • Vicarious liability is direct liability. <br> a. True <br> b. False
    10·1 answer
  • Kelly received a $60,000 salary during 2017. Her federal income tax withholding rate was 20%, and the Social Security base amoun
    14·1 answer
  • What types of crime you experience most frequently?​
    8·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!