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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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The owners of Arthouse Inc., a national artist supplies chain, are contemplating purchasing Craftworks Inc, a smaller chain. Art
Elodia [21]

Answer:

It can purchase at most, $18.13 per share.

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Explanation:

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3 years ago
Warranty service, processing of complaints, and costs of litigation are examples of Multiple Choice appraisal costs. internal fa
zhannawk [14.2K]

Examples of internal failure costs include warranty service and complaint handling. As a result, choice b is accurate.

<h3>What do you mean by internal failure cost?</h3>

Internal failure costs are expenses related to flaws discovered prior to the client receiving the good or service. External failure costs are expenses related to flaws discovered after the client has purchased the good or service.

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Hence, warranty services all are examples of the internal failure cost.

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2 years ago
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Answer:

D, product-communication adaptation

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Cheers.

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3 years ago
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