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
maksim [4K]
3 years ago
12

A firm has zero debt and an overall cost of capital of 13.8 percent. The firm is considering a new capital structure with 40 per

cent debt. The interest rate on the debt would be 7.2 percent and the corporate tax rate is 34 percent. What would be the cost of equity with the new capital structure
Business
2 answers:
lara31 [8.8K]3 years ago
6 0

Answer:

First we need to compute levered cost of equity

Ro = 15.40%

D/E ratio = 0.40/(1-0.40) = 0.6667

Rd=7.2%

We have following formula for levered cost of equity using MM model proposition II:

Without taxes

Re = Ro + (Ro – Rd) x (1-t) x D/E

     = 0.1380 + (0.1380-0.0720)x (1-0.0)x0.6667

     = 0.1380 + 0.0440

     = 18.20%

Therefore, new cost of equity would be 18.20%.

With taxes

Re = Ro + (Ro – Rd) x (1-t) x D/E

     = 0.1380 + (0.1380-0.0720)x (1-0.34)x0.6667

     = 0.1380 + 0.0290

     = 16.70%

Therefore, new cost of equity would be 16.70%.

mestny [16]3 years ago
6 0

Answer: 16.70%

Explanation:

You might be interested in
Which estimating technique decomposes the work into lower, more detailed pieces, preferably the lowest level of WBS work element
elixir [45]

Answer: (C) Bottom-up estimating

Explanation:

The bottom-up estimating is one of technique used by the manager or lead of the project department in the project management process.

By using this technique the manager makes an estimated process for assigning the different types of task in project management and it also divide the task into the different groups so that they work done more efficiently and accurately.

According to the given question, the bottom-up estimating technique are used for decomposes the work into the detailed format.  

Therefore, Option (C) is correct.

4 0
3 years ago
Pls help me!! And thank you so much
marshall27 [118]
The answer will be C

i hope this helps
3 0
3 years ago
Read 2 more answers
A low home inflation rate relative to other countries would ____ the home country's current account balance, other things being
Musya8 [376]

Answer:

Increase; increase.

Explanation:

Inflation can be defined as the persistent rise in the price of goods and services in an economy.

A low home inflation rate relative to other countries would increase the home country's current account balance, other things being equal. Low growth in the home income level relative to other countries would increase the home country's current account balance, other things being equal. A country's current account balance is a statement of the value of its exports and imports of goods and services at a specific period of time.

<em>Hence, when the level of inflation is low in a particular country; their current account balance would be high. However, when the level of inflation is high it results in low growth and as such increases the home country's current account balance, other things being equal. </em>

7 0
3 years ago
Consider two occupations (A and B) in which people have the same skills and abilities. When employed, workers in the two occupat
Crank

Answer: The hourly wage will be higher in occupation B.

Explanation:

From the information given in the question, workers in occupations A and B possess the same skills and abilities as work for the same number of hours. The difference between both occupations is that there is stability of employment for workers in occupation A while there are seasonal layoffs in occupation B.

Due to the seasonal changes in occupation B, the hourly wage will be higher in occupation B. Workers in occupation B need to be compensated in order to overcome the layoffs and uncertainties.

8 0
3 years ago
Coronado Industries is planning to sell 900 boxes of ceramic tile, with production estimated at 470 boxes during May. Each box o
maksim [4K]

Answer:

Total pounds= 19,880

Explanation:

Giving the following information:

Production= 470 boxes

Each box of tile requires 44 pounds of clay mix

Beginning inventory= 4,700 pounds

Desired ending inventory= 3,900 pounds

<u>To calculate the direct material purchase, we need to use the following formula:</u>

Purchases= production + desired ending inventory - beginning inventory

<u>Direct material budget (in pounds):</u>

Production= 470*44= 20,680

Desired ending inventory= 3,900

Beginning inventory= (4,700)

Total pounds= 19,880

5 0
2 years ago
Other questions:
  • Chandra spent part of her workday booking flights and accommodations for her vacation next month. she tells herself that this is
    12·1 answer
  • A random sample of 900 individuals has been selected from a large population. It was found that 180 are regular users of vitamin
    9·1 answer
  • Based on predicted production of 17,000 units, a company anticipates $255,000 of fixed costs and $216,750 of variable costs. The
    15·1 answer
  • Hillside issues $2,600,000 of 5%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31
    9·1 answer
  • Thach Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. Th
    7·1 answer
  • James Stillman is an investment adviser representative with Rock, Feller, and Standard (RFS), a covered adviser with its princip
    13·1 answer
  • Katie can mitigate the problem without alerting the new owners or let them know about this new disclosure and possibly delay or
    9·1 answer
  • A company that owns companies that are in a different industry and performs
    13·1 answer
  • When an entrepreneur makes the decision to own and run a business, he or she assumes risks that are offset by the potential of _
    12·1 answer
  • When museums charge a lower admission fee to students and senior citizens, this form of price discrimination is known as _______
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!