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nadezda [96]
3 years ago
9

A firm has zero debt in its capital structure. Its overall cost of capital is 8%. The firm is considering a new capital structur

e with 50% debt. The interest rate on the debt would be 5%. Assuming that the corporate tax rate is 40%, and all else is equal. including its risk profile, what would be its new cost of equity?
Business
2 answers:
Oxana [17]3 years ago
5 0

Answer:

 9.8%        

Explanation:

Formula;

Ke=overall cost of capital+(1-.4)(Overall cost of capital-cost of debt)

Where Ke= Cost of equity

overall cost of capital=8%

cost of debt=5%

Ke=8%+(1-.4)*(8%-5%)

Ke=8%+(1.8%)

Ke=9.8%

madam [21]3 years ago
4 0

Answer: 9.8%

Explanation:

Because rs = 8 + (1 - .4)(1)(8-5) = 8 + 1.8 = 9.8%

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If Company A has a shareholders' deficit, which of the following can it do to improve its debt-to-equity ratio?
sertanlavr [38]

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sell off part of its inventory and or equipment

Explanation:

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6 0
3 years ago
Pam and Lennyâs ice cream shop charges $1.6 for a cone. Variable expenses are $0.35 per cone, and fixed costs total $2,200 per m
Andrei [34K]

Answer:

Pam and Lenny's Ice Cream Shop

a. The effect of the promotion on operating income for the second week of February is an increase by $350.

b. The promotion should occur.  The shop will make additional operating income of $350 within the second week.  And there will be spillover positive effects during the coming weeks after the promotion.

Explanation:

a) Data and Calculations:

Selling price per cone of ice cream = $1.60

Variable expenses = $0.35

Contribution = $1.25

Fixed costs per month = $2,200

Additional sales from the promotion = 650 cones

Revenue from additional sales = $1,040.00 ($1.60 * 650)

Variable cost                                     227.50 ($0.35 * 650)

Cost of promotions:

Giveaways                                        297.50 ($0.35 * 850)

Advertising costs                              165.00

Total costs                                      $690.00

Additional income                          $350.00

6 0
3 years ago
When the production manager finds the average life of her battery-lifetime data, this is an example of what phase of inferential
den301095 [7]
Finding the average life of her battery lifetime data is an example of : D. Data analysis

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hope this helps
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3 years ago
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Answer:

i think it is $98,602

Explanation:

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3 years ago
Stelwire LLC, a vintage car dealer, advertises the sale of a 1964 Ford Thunderbolt. Ralph
DENIUS [597]

Answer:

A) firm offer rule

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The firm offer rule states that an offer shall remain open and firm until its expiration date (in this case a fortnight). Stelwire LLC can revoke an offer (anyone can) but in order to do so, it must notify the other party about the revocation. If Stelwire LLC didn't properly revoke the offer before Ralph accepted it, then they are liable for it.

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