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
soldier1979 [14.2K]
3 years ago
14

Caddie Manufacturing has a target debt-equity ratio of .95. Its cost of equity is 11 percent, and its pretax cost of debt is 7 p

ercent. If the tax rate is 24 percent, what is the company’s WACC?
Business
1 answer:
Zigmanuir [339]3 years ago
6 0

Answer:

8.20%

Explanation:

Debt equity ratio = 0.95

or

Debt = 0.95 × equity

Cost of equity, ke = 11% or 0.11

Pretax cost of debt, kd = 7% or 0.07

Tax rate = 24% or 0.24

Therefore;

WACC = {Weight of equity × ke } + {Weight of debt × kd × (1-Tax rate)}

It is to be noted that ;

Weight of equity = Equity ÷ (Debt + Equity)

= Equity ÷ ( 0.95×Equity + Equity)

=1 ÷ 1.95

=0.513

Also,

Weight of debt = Debt ÷ ( Debt + Equity)

=0.95 × Equity ÷ ( 0.95 × Equity + Equity)

= 0.95 ÷ 1.95

=0.487

Hence,

WACC = {0.513 × 0.11} + {0.487 × 0.07 × (1-0.24)}

= {0.05643} + {0.03409 × 0.76}

= 0.0823384

or

0.0823384 × 100%

=8.23384

=8.20%

You might be interested in
Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 unit
Sloan [31]

Answer:

The price elasticity of supply is 1.22

Explanation:

Please refer to the attached file

8 0
3 years ago
Rank these jobs in the Law, Public Safety, and Security career cluster based on years of schooling required, from most to
love history [14]

Answer:

The correct answer is the option C: Lawyer - Probation Officer - Firefighter

Explanation:

To begin with, the lawyer would be the one who requires more years of schooling in order to accomplish the merit of graduating so the person would be able to perform that profession in the legal areas. Secondly, the probation officer follows because it requires years of schooling according to its own subject of study and at least the firefighter who does not need too many years of schooling once high school graduation.

6 0
4 years ago
Other than the business letter, which format might Mr.Stroud have chosen to deliver similar information to Ms.Davis?
Fantom [35]
My guess would be Email because its a similar to sending a business letter 
3 0
4 years ago
On December 1, Marzion Electronics Ltd. has three DVD players left in stock. All are identical, all are priced to sell at $161.
Leni [432]

Answer:

$208

Explanation:

Using the FIFO Inventory method, inventory items are assumed to be sold in the order in which they were purchased from the earliest to the latest.

The order of purchase of the inventory items are.

Jun. 1, DVD Player 1012, $113

Nov. 1, DVD Player 1045, $95

Nov. 31, DVD Player 1056, $88

Therefore, if two of the three items are sold, the cost of goods sold is the cost of the first two items purchased

= 113 + 95 = $208.

4 0
4 years ago
Read 2 more answers
A Japanese firm issued and sold a pound denominated bond in the United Kingdom. A U.S. firm issued bonds denominated in dollars
wel

The U.S. bond is a Eurobond and the Japanese bond is termed a foreign bond.

Answer: Option C

<u>Explanation:</u>

The bond that has been issued by the firm in the United States of America is denominated in the US dollars only. But it is sold in Japan. So this bond is a Euro bond.

But since the bond issued by the Japanese firm is denominated in pounds. And this pound denominated bond is also sold in the United Kingdom, therefore this bond is a foreign bond and not a euro bond.

5 0
3 years ago
Other questions:
  • Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal p
    6·1 answer
  • OrdOnline, a pure click company offering online auctioning, decides to launch a promotional program to increase its sales. The c
    12·1 answer
  • When Apple Inc. contracts with companies outside the United States to manufacture its products, citing their workers’ flexibilit
    13·1 answer
  • Glossamer Inc., a company owned by George and Alex, faces huge debts and is eventually shut down due to bankruptcy. The company'
    9·1 answer
  • What are 2 characteristics of a specialty contract 
    12·1 answer
  • Suppose the demand for good X is given by Qd x = 10 - 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and i
    12·1 answer
  • Brooks Company received proceeds of $188,500 on 10-year, 8% bonds issued on January 1, 2016. The bonds had a face value of $200,
    12·1 answer
  • Q-mart failed to include inventory that was kept in a separate warehouse in its 12/31 end-of-the-period inventory count. Consequ
    5·1 answer
  • Whenever significant expansionary policies are implemented and left in place for at least half a year or more, the likely result
    13·2 answers
  • The end-of-the-year account balances for Yelton Industries are as follows:
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!