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
Vesnalui [34]
3 years ago
6

PAW Industries has 5 million shares of common stock outstanding with a market price of $8.00 per share. The company also has out

standing preferred stock with a market value of $10 million, and 100,000 bonds outstanding, each with face value $1,000 and selling at 96% of par value. The cost of equity is 19%, the cost of preferred is 15%, and the cost of debt is 9%. If PAW's tax rate is 34%, what is the WACC?A. 10.14%B. 10.38%C. 12.51%D. 14.33%`
Business
1 answer:
AlladinOne [14]3 years ago
3 0

Answer:

A. 10.14%

Explanation:

1.Market value of PAW common stock:5,000,000*8=$40,000,000

2.Market value of PAW outstanding preferred stock=$10,000,000

3.Market value of PAW bonds outstanding=96,000,000(100,000*1000*96%)

Total Market value(1+2+3)=146,000,000

4.Cost of equity amount on common stock(19%*40,000,000)=7,600,000

5.Cost of preferred stock amount (15%*10,000,000)=$1,500,000

6.After tax cost of Debt amount(9%*66%*96,000,000)=$5,702,400

Total cost amount(4+5+6)=14,802,400

The WACC can be calcualted as: Total cost amount/Total market value

                                                        14,802,400/146,000,000=10.14%

The answer should be A. 10.14%

You might be interested in
What would a central bank need to do to reverse the effects of a favorable supply shock on inflation? what would its reaction do
denis-greek [22]

A favorable supply shock is a sudden increase in supply that makes the short-run aggregate supply curve (SRAS) shift to the right, average price levels go down and real GDP also shifts to the right. In this case, average price levels go down as shown in the figure below from p1 to p2 SRAS shifts right.

This may make create deflation in an economy and discourage new producers to enter the market, to bring back inflation, the central bank may reduce interest rates and decrease the money supply in the market, and in short, will follow expansionary monetary policy. This will make people demand more and hence as aggregate demand shifts to correct average price levels may again go up. This move will create new jobs in the market as aggregate demand will increase in the short term.

A supply shock is an event that causes unexpected cost increases or production disruptions. This shifts the short-run aggregate supply curve to the left, boosting inflation and lowering real domestic production.

Learn more about supply shock at

brainly.com/question/9270152

#SPJ4

6 0
1 year ago
Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar equipment used in the o
Ede4ka [16]

Solution :

We know that the exchange takes place when the FMV receive is equal to the FMV given up.

Where the FMV = fair market value

The commercial substance means the future cash flows exchange.

The non monetary exchange refers to the cash which is less than 25% of the fair value exchange.

The journal entries for the Santana Corp. when the exchange lack the commercial substance are reported as :

Transaction                                           Debit ($)                 Credit ($)

Asset(new)                                           11,000

Accumulated depreciation(old)          9,000

Asset (old)                                                                       28,000

Cash                                                                                 2000

The journal entries for Delaware Corp. when the exchange lacks the commercial substance.

Transaction                                           Debit ($)                 Credit ($)

Asset(new)                                            16,000  

Accumulated depreciation (old)          10,000

Loss                                                                                      2500

Assets (old)                                                                           28,000                                  

7 0
2 years ago
You are caring for a 69-year-old man with congestive heart failure. His breathing is profoundly labored, his oxygen saturation r
sertanlavr [38]

Answer:

B)

Explanation:

Based on the information provided within the question it can be said that in this scenario you should preoxygenate him with a bag-mask device and then perform blind nasotracheal intubation. This is the process of placing oxygen tubes into the individuals nasal track and down the throat to allow better airflow.

7 0
3 years ago
Wisconsin Farm Equipment Company sold equipment for cash. The income statement shows a loss on the sale of $ 10 comma 000. The n
tester [92]

Answer:

A. positive cash flow of $ 20 comma 900 from investing activities

Explanation:

book value - sales price = loss on sale

30,900 - sales price = 10,000

30,900 - 10,000 = sales price

sales price = 20,900

Assumming the purchase was on cash, it will be disclosure as cash generated from investing activities for 20,900

The reason is that cashflow do not focus on the gain or loss from the sale. It focus on the cash movements and this sale involve a cashinflow of 20,900

3 0
3 years ago
Alcott's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $45.00, what is its nominal (not eff
harina [27]

Answer:

= 8.89%

Explanation:

T<em>h rate of return on a preferred stock is the dividend divided by the price of the stock multiplied by 100</em>

<em>Return = Dividend/price × 100</em>

Quarterly dividend = $1

<em>Annual dividend </em>

= 1 × 4 ( Note there are four quarters in year)

= $4

<em>Annual rate of  return</em>

= (4/45)× 100

= 8.89%

5 0
3 years ago
Other questions:
  • Northland Juices, a division of New York-based Apple &amp; Eve, competes with Ocean Spray in the cranberry juice category. To be
    8·1 answer
  • Five friends​ (a, b,​ c, d, and​
    11·2 answers
  • What is a stigma ?????
    11·1 answer
  • "Commonwealth Construction (CC) needs $2 million of assets to get started, and it expects to have a basic earning power ratio of
    9·1 answer
  • Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.8.
    7·1 answer
  • PLEASE LEAVE A COMMENT EVEN IF THERE ARE TWO ANSWERS! Hi, I am picking a name for my coffee shop, I was thinking CoffeeCake beca
    14·2 answers
  • Freeman, Inc., reported net income of $40,000 for 2015. However, the company's income tax return excluded a revenue item of $3,0
    13·1 answer
  • What will happen to a project's schedule if there are resource overloads and the critical path is delayed?
    14·1 answer
  • Bandingkan bentuk pemilikan<br>Perniagaan koperasi dengan<br>perniagaan lain​
    5·1 answer
  • ____ leadership is the ability to anticipate, envision, maintain flexibility and think strategically and work with others to ini
    15·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!