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
The Greeson Clothes Company produced 25,000 units during June of the current year. The Cutting Department used 6,380 direct labo
ra1l [238]

Answer:

Cutting Department:    

Rate variance = 6380*(10.9-11) = -638 Favorable  

Time variance = 11*(6380-25000*0.25) = 1430 Unfavorable  

Total direct labor cost variance = (6380*10.9)-(25000*11*0.25) = 792 Unfavorable

Sewing Department:

Rate variance = 9875*(11.12-11) = 1185 Unfavorable  

Time variance = 11*(9875-25000*0.4) = -1375 Favorable  

Total direct labor cost variance =(9875*11.12)-(25000*11*0.4) = -190 Favorable

4 0
3 years ago
Calip Corporation, a merchandising company, reported the following results for October: Sales $427,000 Cost of goods sold (all v
nekit [7.7K]

Answer: $222,800

Explanation:

Given that,

Sales = $427,000

Cost of goods sold (all variable) = $173,400

Total variable selling expense = $21,200

Total fixed selling expense = $18,900

Total variable administrative expense = $9,600

Total fixed administrative expense = $36,300

Variable expenses:

= Cost of goods sold + Variable selling expense + Variable administrative expense

= $173,400 + $21,200 + $9,600

= $204,200

Contribution margin = Sales - Variable expenses

                                  = $427,000 - $204,200  

                                 = $222,800

5 0
3 years ago
Credit score is used to determine your financial worth ?
Sergeu [11.5K]
The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, and repayment history, and other factors. Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner.
4 0
2 years ago
Read 2 more answers
Certain contracts, such as those involving the sale of personal property for $500 or more:_______.
djverab [1.8K]

Answer:

B. Must be written to be enforceable

Explanation:

In the United state, sale of personal property for $500 or more must be written to be enforceable. These kind of contracts are said to be within the statute of fraud.

These types of contracts are called Sales contracts which is an agreement between the buyer and seller. For the amount of money involved, a written contract provides security and peace to the mind of all those involved in the contract, hence why deals above $500 must be written to be enforceable.

8 0
3 years ago
William (71), a retired single taxpayer, received a monthly pension of $2,500 ($30,000 annually). He did not contribute any afte
IceJOKER [234]

Based on the information given, it should be noted that the amount of William's pension distribution that is taxable is $30000.

From the information given, William is a retired single taxpayer and he received a monthly pension of $2,500 ($30,000 annually). He did not contribute any after-tax dollars to the plan.

It should be noted that pension is counted as a regular income for tax purposes. Therefore, the pension that'll be received by William will be a taxable income

Therefore, the taxable amount will be $30000.

Learn more about taxes on:

brainly.com/question/1657264

4 0
2 years ago
Other questions:
  • What will be the result when managers use new forms of organizing?
    15·1 answer
  • An oligopoly is a market in which a the actions of one seller in the market have no impact on the other sellers' profits. b firm
    8·1 answer
  • Granfield company is considering eliminating its backpack division, which reported an operating loss for the recent year of $41,
    11·1 answer
  • A company is trying to decide how many workers to hire. They want to maximize profits. What is the maximum number of workers the
    14·2 answers
  • United Technologies is a good example of a​ ________ strategy because it uses individual or separate family brand​ names, includ
    5·1 answer
  • The following present value factors are provided for use in this problem.
    11·1 answer
  • A recent national survey found that high school students watched an average (mean) of 6.8 DVDs per month with a population stand
    10·1 answer
  • The purpose of the cash flow statement is to:
    5·1 answer
  • Updating procedures and systems, reinforcing marketing strategies, and updating advertising techniques, are all examples of what
    15·1 answer
  • The law of diminishing utility states that added satisfaction declines as a consumer acquires additional units of a given produc
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!