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cestrela7 [59]
4 years ago
5

Charlotte's Crochet Shoppe has 12,200 shares of common stock outstanding at a price per share of $68 and a rate of return of 11.

33 percent. The company also has 370 bonds outstanding, with a par value of $1,000 per bond. The pretax cost of debt is 5.99 percent and the bonds sell for 95.1 percent of par. What is the firm's WACC if the tax rate is 39 percent?
Business
1 answer:
DENIUS [597]4 years ago
8 0

Answer:

9.04%

Explanation:

The computation of firm's WACC is shown below:-

MV of equity = Price of equity × Number of shares outstanding

= $68 × 12,200

= $829,600

MV of Bond = Par value × bonds outstanding × Percentage of par

= $1,000 × 370 × 0.951

= $351,870

MV of firm = MV of Equity + MV of Bond

= $829,600 + $351,870

= $1,181,470

After tax cost of debt = Cost of debt × (1 - Tax rate)

After tax cost of debt = 5.99 × (1 - 0.39)

= 3.6539

Weight of equity = MV of Equity ÷ MV of firm

= $829,600 ÷ $1,181,470

=0.7022

Weight of debt = MV of Bond ÷ MV of firm

= $351,870 ÷ $1,181,470

= 0.2978

WACC = After tax cost of debt × Weight of debt + Cost of equity × Weight of equity

= 3.65 × 0.2978 + 11.33% × 0.7022

= 9.04%

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LA Diversified Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3.8%. The stock has
OleMash [197]

Answer:

The intrinsic value of the stock is $36.55 and option B is the correct answer.

Explanation:

Using the CAPM, we can calculate the required rate of return on the stock which is the minimum return required by the investors to invest in the stock.

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market

r =  0.02 + 1.29 * (0.1 - 0.02)   =  0.1232 or 12.32%

The stock's dividend growth is constant. Thus, the current price or intrinsic value of such a stock can be calculated using the constant growth model of the DDM. Th formula for price under the constant growth model is,

P0 = D1 / r-g

Where,

  • D1 is the dividend expected for the next period or D0 * (1+g)
  • r is the required rate of return
  • g is the growth rate in dividends

P0 = 3 * (1+0.038)  /  (0.1232 - 0.038)

P0 = $36.549 rounded off to $36.55

5 0
3 years ago
Do you think credit scores should play a<br> role in choosing a partner? Why or why not
Anvisha [2.4K]

Answer with Explanation:

Yes, I believe<em> credit scores</em> should be considered by a person when choosing a partner. Having a partner also means <u>sharing each other's financial burdens</u>, thus, it is essential to know how a person handles his finances. Having a good credit score will most likely mean that the person is <em>financially responsible. </em>This may also mean that once you live together, he'll share in the expenses of the house and will be responsible in paying them on time. Many relationships end up in divorce because of <em>financial constraints</em> and if this is often the case, it just becomes reasonable to know first the credit score of the partner you'd be choosing.

3 0
3 years ago
What is the shelf life of an item placed in a peel package or wrapped in nonwoven wrapper
erik [133]

Answer:

<u><em>Indefinite, Unless the item is compromised in some way.</em></u>

Explanation:

The Maximum time for which a food item can be stored before it becomes unfit for sale and consumption. In simple terms it  is means the time after which the item should not be on a supermarket or pantry shelf.  Shelf life is also applicable to medical devices, cosmetics, foods tires, chemicals, explosives and perishable items. On most of the packed products an advisory best before is printed on the package.

8 0
4 years ago
Benson, Inc., manufactures a single product. The company's plantwide overhead rate is $25 per machine-hour (MH). Each unit of pr
viva [34]

Answer:

Total unitary cost= $29.8

Explanation:

Giving the following information:

The company's plantwide overhead rate is $25 per machine-hour (MH). Each unit of the product requires 0.6 machine hours. The direct material cost per unit of product is estimated at $10.96 and direct labor cost is estimated at $3.84 per unit.

Total unitary cost= 10.96 + 3.84 + (25*0.6)= $29.8

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4 years ago
Granting access to a user based upon how high up he is in an organization violates what basic security premise?
hodyreva [135]

Granting access to a user based upon how high up he is in an organization violates "the principle of least privileges."

As the principle of least privileges states that a person should be given only those privileges that are needed or are necessary to perform a specific job or task and nothing more.

The principle of least privileges states that you assign users the minimum set of privileges which they require to do their jobs, according to their roles.

The principle of least privilege prevents the spread of malware on your network. An administrator or superuser with access to a lot of other network resources and infrastructure could potentially end up spreading malware to all those other systems which he gets access to.

Hence, if the organization grants access to a user based upon how high up he is then the organization violates the principle of least privileges.

To learn more about the least privileges here:

brainly.com/question/27034248

#SPJ4

3 0
2 years ago
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