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iren2701 [21]
3 years ago
7

Auto Parts is considering a merger with Car Parts. Car Parts market-determined beta is 0.9, and the firm currently is financed w

ith 20% debt, at an interest rate of 8%, and its tax rate is 25%. If Auto Parts acquires Workman, it will increase the debt to 60%, at an interest rate of 9%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 4%. What will Car Parts required rate of return on equity be after it is acquired?
Business
1 answer:
kvasek [131]3 years ago
5 0

Answer: 9.7%

Explanation:

Given Data

Rf = Risk free return = 6%,

Rpm = Risk premium = 4%,

Beta = 0.9

Wd = Debt = 20%

rd = cost of debt = 8%

We = equity = 80%

Re = Rf + Beta (Rpm)

= 0.06 +0.9 (0.04)

= 0.096 * 100

= 9.6%

Unlevered Equity Cost ;

ReU= Wd × rd + We × re

= 0.20 × 8% + 0.80 × 9.6%

= 9.28%

Levered Equity Cost:

New Debt = 60%,

New Equity = 40%,

New rd = 9%

ReL = ReU + (ReU - rd) (D ÷ E)

= 9.28% + (9.28% - 9%) (0.60 ÷ 0.40)

= 0.097 * 100

= 9.7%

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On June 30, Sharper Corporation’s stockholders' equity section of its balance sheet appears as follows before any stock dividend
Stolb23 [73]

Answer:

Sharper Corporation's Stockholders' Equity Section of Balance Sheet:

Common Stock:

Authorized Capital 120,000, $10 par value $0

Issued capital 90,000 at $10 par = $900,000

APIC = $400,000

Retained Earnings = $310,000

Total Stockholders' Equity = $1,610,000

2 Number of shares outstanding after the dividend distribution is 90,000 shares.

Explanation:

1. The dividend per share was calculated as follows:

50% of $10 = $5 per share

Total dividends = $5 x 90,000 = $450,000.

2. The Retained Earnings changed from $760,000 to $310,000 ($760,000 - $450,000).  Dividends are paid out of retained earnings.

3. The number of shares outstanding after the distribution of dividends did not change.  It could change if there were a stock split or some shares were repurchased under Treasury Stock.

5 0
3 years ago
Which of the following distribution systems offers speed and reliability when emergency supplies are needed overseas?A. railroad
erik [133]
<h3>Hello there!</h3>

Your question asks which is a fast and reliable source for emergency supplies that are needed overseas.

<h3>Answer: B). Airfreight</h3>

The reason why answer choice "B). Airfreight" is the correct answer because this is the distribution system that is the quickest to get things overseas.

When you think about going overseas, what do you use? A plane. When you think about going somewhere international, what do you use? A plane. That is the same concept when you're sending things overseas, you would use some sort of air craft to get it overseas.

An airfreight is a really big air craft that can transport tons and tons of supplies, items, etc. An airfreight can go over the ocean and to its destination very quickly. The plane can go hundreds and hundreds of miles per hour for a long period of time. This is why people would use an air freight to deliver emergency supplies overseas.

<h3>Why the other answer choices are incorrect:</h3>

Answer choice "A). railroads" is incorrect because railroads can't go overseas. Have you seen railroads built over the ocean? Absolutely not. Therefore, trains can't go over the ocean because there's no railroads built over the ocean. This is why this answer choice is incorrect.

Answer choice "C). trucking" is incorrect because there is no road over the ocean, therefore the travel path would be cut off for the trucks. In order for the trucks to go overseas, they would need to be transported on a boat, in which would take a long time. This is why this answer choice is incorrect.

Answer choice "D). pipelines" is incorrect because pipelines don't extend to places that are overseas, and pipelines would not be a safe thing to use to get emergency equipment distributed. This is why this answer choice is incorrect.

Answer choice "E). waterways" is incorrect because water ways are just water, large bodies of water to be exact. There is no transportation system in waterways, therefore making this answer choice incorrect.

<h3>I hope this helps!</h3><h3>Best regards, MasterInvestor</h3>
3 0
3 years ago
On December 1, Year 1, El Primero Company purchases inventory from a foreign supplier for 40,000 coronas. Payment will be made i
choli [55]

Answer:

The answer to the question is attached with the document.

Download docx
7 0
2 years ago
Gathering data is one of the focus areas in the ____________ step of decision making.
igomit [66]
2nd step is the correct answer:(
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3 years ago
Please help me!
AleksAgata [21]
It’s asking whatever the market would pay.
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2 years ago
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