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mafiozo [28]
3 years ago
7

Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60

percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm could sell, at par, $100 preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would be incurred. Rollins' beta is 1.2, the risk-free rate is 10 percent, and the market risk premium is 5 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8 percent. The firm's policy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium method to find rs. The firm's marginal tax rate is 40 percent. What is Rollins' cost of preferred stock? Select one: a. 10.0% b. 11.0% c. 12.0% d. 12.6% e. 13.2%
Business
1 answer:
Serggg [28]3 years ago
4 0

Answer:

d. 12.6%

Explanation:

Rollins Corporation will receive $100 - ($100 x 5% flotation costs) = $100 - $5 = $95 net for each preferred stock issued

Since it will have to pay $12 on preferred dividends, the cost of preferred stocks = preferred dividend per preferred stock / net amount received per preferred stock = $12 / $95 = 0.1263 = 12.6%

Flotation costs are costs that a corporation incurs when issuing new stocks or bonds, and they include legal fees, underwriting fees, etc.

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3 years ago
Michigan Cranberry Company sold $10 million worth of cranberries it produced. In producing cranberries, it purchased $1 million
rusak2 [61]

Answer:

The answer is: $9 million

Explanation:

The gross domestic product includes all the final and legal goods and services produced in an economy during one year.

Michigan Cranberry produced $10 million worth of cranberries, but in doing so, it imported $1 million worth of supplies from other countries. Cross border labor is included in the GDP.

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Rather than acquire an existing machine parts manufacturer in Mexico, Robertson Corp., based in Ohio, chose to establish new ope
Rufina [12.5K]

The form of Foreign direct investment used to acquire the existing machine parts manufacturer in Mexico, Robertson Corp based in Ohio is called a greenfield investment.

<h3>What is a greenfield investment?</h3>

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In conclusion, the acquisition of Robertson Corp in other to establish new operations in a northern Mexico is called a greenfield investment.

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5 0
2 years ago
When Coca Cola introduced Coke Zero,this was an example of a _____ strategy.
Paladinen [302]

Answer:

B) product line extension

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7 0
3 years ago
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yanalaym [24]

Answer: (B) Backward induction

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In any type of situation, the backward induction basically used the optimal strategy type for making some effective result of the given situation.

According to the given scenario, Elly should use the backward induction process for making the decisions more effectively regarding her shop.

Therefore, Option (B) is correct.

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3 years ago
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