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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%

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djyliett [7]

Answer:

Percentage total return is 12.64%

Dividend yield is 2.19% or 2%

Explanation:

Computing the percentage total return by using the formula:

Percentage total return = Gain or loss / Initial price × 100

where

Gain or loss is determined as:

Gain or loss = Ending Share price - Initial price

= $98 - $87

= $11 (it is a gain)

Initial price is $87

Putting the values above:

Percentage total return = $11 / $87 × 100

= 12.64%

Computing the dividend yield by using the formula:

Dividend yield = Annual dividend per share /  Stock's price per share

where

Annual dividend per share is $2.15

Stock's price per share is $98

Putting the values above:

Dividend yield = $2.15 / $98

= 2.19% or 2%

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B.check with a credit and information management company

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3 years ago
"The best business portfolio is the one that ________.
diamong [38]

Answer:

The correct answer is option B,the business portfolio is the one that best fits the company's strengths and weaknesses to opportunities in the environment.

Explanation:

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Potential GDP refers to the level of ___________ Select one: a. Nominal GDP in the long run. b. Nominal GDP in the short run. c.
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the market value of the equity of Ginger, Inc., is $710,000. The balance sheet shows $45,600 in cash and $227,800 in debt, while
KengaRu [80]

Answer:

3.34 times

Explanation:

Ginger incorporation has a market valu of equity of $710,000

The debt is $227,800

Cash is $45,600

EBIT is $102,800

The first step is to find the enterprise value

= market capitalization + debt -cash

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= $937,800-$45,600

= $892,200

The EBITDA can be calculated as follows

= EBIT + depreciation and amortization

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Therefore the enterprise value-EBITDA can be calculated as follows

= 892,200/267,400

= 3.34 times

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