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
Svetach [21]
3 years ago
12

Peter's Audio Shop has a cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000

shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop? Group of answer choices 9.45%
Business
1 answer:
hjlf3 years ago
7 0

Answer:

Explanation:

First, find the market values of each;

Equity = 104,000*20 = $2,080,000

Preferred stock =40,000*34 = $1,360,000

Debt = 1.02*500,000 = $510,000

TOTAL = 2,080,000 + 1,360,000 + 510,000 = 3,950,000

WACC = wE*rE + wP*rP + wD*(rD(1-tax))

wE =weight of equity = 2,080,000/3,950,000 = 0.527

rE= cost of equity = 11% or 0.11

wP= weight of Preferred stock = 1,360,000/3,950,000 = 0.344

rP =cost of preferred stock = 8% or 0.08

wD= weight of debt = 510,000/3,950,000 = 0.129

rD = cost of debt = 7% or 0.07

Therefore ,

WACC = (0.527 * 0.11) + (0.344 * 0.08) +(0.129 * (0.07(1-0.34))

WACC =0.05797 + 0.02752 + 0.0059598

WACC= 0.0914498 OR 9.14%

You might be interested in
A movie theater manager asks an employee, "Should we distribute tickets to the movie on a first-come-first-served basis or throu
mixer [17]

Answer:

For whom to produce.

Explanation:

This fundamental question tends to answer the sector of the customers the company will produce for. It reflects the customer's buying power and willingness.

  • For example, If the customer we are producing has enough money, so we should go for first come first served basis, OR, If the customer lacks money and it hinders the customer to watch a movie so we motivate them to participate in a lottery so are in guise targeting that section as well.
4 0
3 years ago
What is a promotional strategy?
Citrus2011 [14]

Answer:

Promotional strategy is designed to inform, persuade, or remind target audiences about those products.

Explanation:

6 0
3 years ago
Read 2 more answers
You have an investment account that started with ​$3 comma 000 10 years ago and which now has grown to ​$6 comma 000. a. What an
zloy xaker [14]

Answer:

The correct answer for option (a) is 7.17% and for option (b) is $48,546.69.

Explanation:

According to the scenario, the given data are as follows:

(a) Present value = $3,000

Future value = $6,000

Time period = 10 years

So, we can calculate the annual rate of return by using following formula:

Rate of return = (( FV ÷ PV)^1/t  -1)

= (( $6,000 ÷ $3,000)^1/10 -1)

= (2)^0.1 - 1

= 1.07177346254 - 1

= .07177 or 7.17%

(b) Present value = $12,000

Rate of interest (r) = 15%

Time period = 10 year

So, we can calculate the Future value by using following formula:

FV = PV × ( 1+r)^t

= $12,000 × ( 1 + 15%)^10

= $12,000 × 4.04555773571

= $48,546.69

8 0
3 years ago
What financial behaviors will typically lead to a low credit score everfi?
Arisa [49]
Maxed out credit cards
7 0
3 years ago
g Mr. and Mrs. David file a joint tax return. They have $169,300 taxable income in 2020, $120,300 of which is ordinary income an
Paul [167]

Answer:

$5,860

Explanation:

Computation for their tax savings from the preferential rate

First step is to calculate their tax liability

Using this formula

Tax liability =[Tax amount on $169,300 ordinary income-(Tax Amount on $120,300 ordinary income +Tax amount on $49,000 preferential income)]

Let plug in the formula

Tax Savings=[$35,648-($22,438+$7,350)]

Tax Savings=$35,648-$29,788

Tax Savings=$5,860

Therefore their tax savings from the preferential rate is $5,860

8 0
3 years ago
Other questions:
  • If the real output is at a near maximum level, which of the following should be considered?
    5·1 answer
  • The student-run newspaper asks students to visit a web page and respond to questions regarding a proposed tuition increase. Only
    13·1 answer
  • Which strategy works best to help people feel more comfortable in meetings?
    7·2 answers
  • Just Dew It Corporation reports the following balance sheet information for 2017 and 2018.
    9·2 answers
  • If the seller fails to provide the property disclosure statement to the buyer before the buyer signs the purchase contract,
    7·1 answer
  • Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,500 per month plus $48 per boat. For the month of
    10·1 answer
  • When diminishing marginal utility starts happening as a person consumes more and more of a given good rev: 04_09_2018 Multiple C
    5·1 answer
  • The periods of time to undertake goals can be:
    15·1 answer
  • Monetarists believe that changes in the supply of money Question 24 options: do not affect aggregate demand. affect aggregate de
    15·1 answer
  • The u.s. bureau of labor statistics has a website that can be of great help when researching careers. it contains many types of
    6·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!