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forsale [732]
3 years ago
5

Suppose the Simmons Co's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2

percent. The yield to maturity in the firm’s bonds is 7.6 percent and the debt-equity ratio is .45. What is the RWACC if the tax rate is 34 percent?
Business
1 answer:
notsponge [240]3 years ago
8 0

Answer:

WACC 0.1030590%

Explanation:

<u>First we use CAPM to solve the Cost of Equity</u>

Ke= r_f + \beta (r_m-r_f)  

risk free 0.034

market rate  

premium market market rate - risk free 0.082

beta(non diversifiable risk) 1.37

 

Ke= 0.034 + 1.37 (0.082)  

Ke 0.14634

<u />

<u>Then we calculate the WACC</u>

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

Ke 0.14634

Equity weight 0.55

Kd 0.076

Debt Weight 0.45

t 0.34

WACC = 0.14634(0.55) + 0.076(1-0.34)(0.45)

WACC 0.1030590%

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Fittoniya [83]

Answer:

The implication is that the Illinois Department of Child Services is a unionized workplace.

Mortimer will derive better benefits that surpass the costs of membership.  He is covered in all collective bargains, even when he resigns his union membership.  Unions negotiate for better working conditions, higher pays, and improved benefits.

When Mortimer has any grievance against the department, the union will also represent him, thereby making his life easier since unions can negotiate better with employers than individual workers.

Mortimer is even lucky to find a job at a unionized workplace because the jobs are not usually advertised as union members easily bring in their relatives and friends to occupy such vacancies.

Explanation:

Most of the disadvantages that Mortimer should complain about unions are disadvantages to the employer and not to him as an individual worker.  For the employer, the union acts as a form of monopoly that can decide whether the workers would work or not.  The unionized workers are not easy to replace with other workers.

8 0
3 years ago
What are the things found in a bank​
alexandr402 [8]

Sentences......

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4 0
3 years ago
Mullineaux Corporation has a target capital structure of 64 percent common stock, 9 percent preferred stock, and 27 percent debt
nlexa [21]

Answer:

10.02%

Explanation:

The computation of the WACC is shown below. The formula of WACC is shown below:

= (Weightage of debt × cost of debt)  + (Weightage of preferred stock) × (cost of preferred stock) + (Weightage of  common stock) × (cost of common stock)

= 27% × 7.6% × (1 - 0.40) + 9% × 5.9% + 64% × 12.9%

= 2.052% × (1 - 0.40) + 0.531% + 8.256%

= 10.02%

8 0
3 years ago
What is a tax refund?
Tatiana [17]

Answer:

A tax refund is essentially a payment to the taxpayer when the taxpayer pays more tax than they owe.

Explanation:

May I have brainliest please? :)

8 0
2 years ago
Which one of the following parties can sell shares of ABC stock in the primary market?-ABC company-Any corporation, other than t
horsena [70]

Answer:

ABC company

Explanation:

Basically there are two markets i.e primary market and the secondary market.  

The primary market is the market in which the initial public offer is taking place that means the new security is first offered to the public by the company whereas, in the secondary market, the broker or investor is involved while offering the securities.  

In the given situation, the ABC company itself is involved while selling the shares of ABC stock in the primary market

4 0
3 years ago
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