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
Alik [6]
3 years ago
12

The market value of Charter Cruise Company's equity is $15 million and the market value of its debt is $5 million. If the requir

ed rate of return on the equity is 20 percent and that on its debt is 8 percent, calculate the company's cost of capita
Business
2 answers:
topjm [15]3 years ago
6 0

Answer:

17%

Explanation:

To calculate this, we use the weighted average cost of capital (WACC) as follows:

Total capital = 15 + 5 = 20

Weight of equity = 15/20 = 0.75, or 75%

Weight of debt = 5/20 = 0.25, or 25%

WACC = (20% × 75%) + (8% × 25%) = 17%

Therefore, the company's cost of capital is 17%.

faust18 [17]3 years ago
3 0

Answer:

17%

Explanation:

The weighted average cost of capital (WACC) can be defined as a financial ratio that calculates an organization cost of financing and getting various assets. This is done by comparing the debt and equity structure of the business.

The formular is represented as:

WACC= E/V × Re + D/V × Rd × (1-Tc)

Where,

-E which is the market value total equity is $15million

-V which is the total market value of the company’s combined debt and equity E + D = $15 million + $5 million= $20million

- Re which is the total cost of equity is 20/100=0.2

- D which is the market value of total sent is $5million

- Rd which is the total cost of debt is =8/100 = 0.08

- Tc which is the income tax rate is 0

Therefore,

WACC= 15/20 ×0.2 +5/20 × 0.08 × (1-0)

=0.75×0.2 + 0.25×0.08×1

=0.15 + 0.02

= 0.17

= 0.17×100

= 17

Thus, the company's cost of capital is 17%

You might be interested in
On October 31, the stockholders’ equity section of Heins Company consists of common stock $370,000 and retained earnings $904,
katovenus [111]

Answer:

1. Before action

Par value of outstanding shares = 37,000 shares*$10 = $370,000

Common stock in excess of par = Total common stock - Par value of outstanding shares = $370,000 - $370,000 = $0

2. After stock dividend

Stock dividend declared = 6% of 37,000 shares = 2,220 sharea

Market price of shares = $16 per share

Stock dividend declared = $16*2,220 shares= $35,520

Common stock in excess of par = $35,520 - $22,200 = $13,320

Total number of shares outstanding = 37,000 + 2,220 = 39,220

Total par value of common stock = 39,220 * $10 = $392,200

t is out of the retained earnings that the stock dividend is declared from. So, retained earnings after stock dividend = $904,000 - $35,520 = $868,480

3. After stock split

Here , there is no financial impact. The no of shares will get X2 because one share is split into two shares.

Number of outstanding shares = 37000 shares*2 = 74000 shares. Also, no impact on the retained earnings

                                    Before Action  After-stock dividend  After stock split

<em>Stockholder's equity</em>

Paid in capital              $370,000.00      $392,200.00           $370,000

Common stock in        $0.00                   $13,320.00               $0

excess of par

Total paid in capital     $370,000.00      $405,520.00            $370,000

Retained earnings       $904,000.00      $868,480.00            $904,000

Total Stockholder's     $1,274,000.00     $1,274,000.00         $1,274,000

equity

Outstanding shares      37000                     39220                     74000

Par value per share      $10.00                    $10.00                      $5.00

6 0
3 years ago
Bowie Sporting Goods manufactures sleeping bags. The manufacturing standards per sleeping bag, based on 5,000 sleeping bags per
grin007 [14]

Answer:

Total Material Variance = $52,130 Unfavorable

Explanation:

Total Material Variance = Actual Cost - Standard Cost

Total Material Variance = Direct Material Price Variance + Direct Material Usage Variance.

But here, we will calculate straight, therefore

Standard cost for 5,200 sleeping bags

= 5,200 \times 4 \times $5.50 = $114,400

Actual Cost = 27,300 \times $6.10 = $166,530

Total Material Variance = $166,530 -  $114,400 = $52,130 Unfavorable

As this is the positive, as also Actual cost is higher than standard therefore, this is unfavorable.

5 0
3 years ago
Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 2011. On the date of acquisit
melamori03 [73]

Answer:

consolidated balance sheet:

land 525,000

Explanation:

The Princeton's land will be valued at book value.

The Sheffield's land will be valued at market value as when Princeton acquired Sheffield the land was appraised at his market value.

So 500,000 x 75% = 375,000 land of Sheffield

<u>Total land:</u>

Princeton Land   150,000

Sheffield  Land <u>  375,000  </u>

              Total    525,000

6 0
2 years ago
A movement along the phillips curve shows that the unemployment rate and inflation rate are.
Gemiola [76]

Changing in response to the supply-side policy.

<h3>What causes a movement along the Phillips curve?</h3>
  • An increase in AD is a shift from point A to point B. Inflation rises, and the jobless rate falls when AD rises. A shift from point A to point C corresponds to a reduction in AD.
  • The Phillips curve is a diagram that illustrates the economic link between the rate of unemployment and the pace at which wages are changing in terms of money. It reflects the belief of economist A. William Phillips that wages tend to increase more quickly when unemployment is low.
  • According to the Phillips curve, unemployment and inflation are inversely related. Lower unemployment is correlated with higher inflation, and vice versa.

A movement along the phillips curve shows that the unemployment rate and inflation rate are.

Changing in response to the supply-side policy.

To learn more about the Phillips curve, refer to:

brainly.com/question/14058703

#SPJ4

3 0
1 year ago
Assume Kader Company has the following reported amounts: Sales revenue
jok3333 [9.3K]

Answer:

100

Explanation:

1000 expensives of the more u do in the book

8 0
3 years ago
Other questions:
  • Careers in the Transportation, Distribution &amp; Logistics Career Cluster include:
    13·2 answers
  • Mirembe is interested in receiving income to help save money for her grandson's college education. She is considering investing
    5·1 answer
  • How is globalization affecting marketplaces in remote areas of the world?
    5·1 answer
  • Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is
    14·1 answer
  • Working for the internal Revenue service is a career in public safety. True or false?
    15·2 answers
  • ____________________ is leveraging cross-border differences in needs and wants of the firm's target customers.
    14·1 answer
  • The economy is in equilibrium, TP = TE. Then, net exports fall. As a result, the __________ curve shifts __________, inventory l
    15·1 answer
  • Pharoah Corporation has the following long-term investments. (1) Common stock of Eidman Co. (10% ownership), cost $102,500, fair
    8·1 answer
  • Kenneth purchased a car from his local dealership, Quartent Cars. However, since the car was not available in the color that Ken
    5·1 answer
  • The marketing decision and research problem should be defined clearly so that a. communication between the researcher and the de
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!