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
disa [49]
4 years ago
8

Suppose that Taggart Transcontinental currently has no debt and has an equity cost of capital of 10%. Taggart is considering bor

rowing funds at a cost of 6% and using these funds to repurchase existing shares of stock. Assume perfect capital markets. If Taggart borrows until they achieved a debt -to-value ratio of 20%, then Taggart's levered cost of equity would be closest to:A) 8.0%B) 9.2%C) 10.0%D) 11.0%
Business
1 answer:
labwork [276]4 years ago
8 0

Answer:

Option (D) is correct.

Explanation:

We have to use MM proposition that cost of equity will change itself in such a manner so that it can take care of its debt.

Cost of equity:

= WACC of all equity firm + (WACC of all equity - Cost of debt ) × (Debt -to-equity ratio)

At the beginning, when there was no debt,

WACC = cost of equity = 10%

Levered cost of equity:

= 10% + ( 10% - 6%) × 0.2

= 10.8%

Therefore, Taggart's levered cost of equity would be closest to 11%.

You might be interested in
With a regressive tax system, as the level of income increases in an economy, the average tax rate will: 
A. Increase
B. Decreas
Ostrovityanka [42]

Answer:

The correct answer to the following question is option B) decrease.

Explanation:

Regressive tax is that of tax which is imposed in such manner that when the income level in the economy increases , the average tax rate would decrease. This type of tax has heavy burden on the low income people as it takes high proportion of their income. So it can be said here that there is an inverse relationship between tax payer's ability to pay ( which can be measured in income , assets or consumption) and the tax rates imposed.

6 0
3 years ago
Nyeil is a consumer products firm that is growing at a constant rate of 6.5 percent. The firm’s last dividend was R3.36. If the
OleMash [197]

Answer:

31.12

Explanation:

Given that,

Growing at a constant rate = 6.5%

Firm’s last dividend, R = 3.36

Required rate of return = 18%

Expected dividend next year = 3.36 × (1 + 6.5%)

                                                 = 3.5784

Market value of stock:

= Expected dividend next year ÷ ( required return - growth rate)

= 3.5784 ÷ (0.18-0.065)

= 31.11652

= 31.12

3 0
4 years ago
On August 20th, one of your employees comes to you with a vacation request. The employee’s available vacation time expires on Se
dexar [7]

Answer:

No

Explanation:

Her vacation is expired and therefore invalid. Also she is requesting for a pay during this period which counters Amy form of sympathy for this employee. However, depending on the relationship the employee has with her employer, there might be a compromise especially if the employee really does need the vacation as she may be burned out or may have postponed vacation till expiration for the interest of the company

3 0
4 years ago
Machinery purchased for $150,000 by Tom Brady Co. in 2010 was originally estimated to have a life of 12 years with a salvage val
Phoenix [80]

Answer:

$7,312.50

Explanation:

The computation of the depreciation expense for 2017 is shown below:

Book Value is

= Cost - Accumulated Depreciation

= $150,000 - {[($150,000 - $24,000) ÷ 12 ] × 7y}

= $150,000 - [($126,000 ÷ 12 ) × 7]

= $150,000 - ($10,500 × 7)

= $150,000 - $73,500

= $76,500

Now the depreciation expense for 2017 :

= ($76,500 - $18,000) ÷ (15 - 7) years

= $58,500 ÷ 8 years

= $7,312.50

5 0
3 years ago
An owner of a corporation is known as a ___________ Group of answer choices limited partner general partner director stockholder
inessss [21]

Answer:

Stockholder.

Explanation:

A corporation can be defined as a corporate organization that has facilities and owns or controls assets used for the production of goods and services in at least one country other than its headquarter (home office) located in its home country.

This ultimately implies that, a corporation is a corporate organization that owns or controls its business in two or more countries.

Some examples of multinational firms are Ap-ple, Volkswagen, G-oogle, Shoprite, Nestlé, Accenture, Shell BP, Chevron etc.

Hence, an owner of a corporation is known as a stockholder.

5 0
3 years ago
Other questions:
  • What low-cost labor did white planters hope to use to regain their wealth?
    9·1 answer
  • In which situation would you opt for a car lease?
    15·2 answers
  • A fixture is an object that formerly was personal property but has become real property. Of the following four rules for determi
    15·1 answer
  • All new employees must first complete a six-week training program.
    11·1 answer
  • You run a nail salon. Fixed monthly cost is $5,518.00 for rent and utilities, $6,014.00 is spent in salaries and $1,613.00 in in
    12·1 answer
  • Contestants on the game show wheel of fortune are given labels to assist them solving the puzzles. these labels activate _______
    8·1 answer
  • Charlotte needs to raise money for a charity benefit she is attending. At lunch, she asks her friend, Samantha, to attend the be
    9·1 answer
  • Brief Exercise 4-09 At Raymond Company, the following errors were discovered after the transactions had been journalized and pos
    8·1 answer
  • For each hour of production, a certain factory requires 1 assembly line worker for every 25 units to be produced in that hour. T
    11·1 answer
  • giannis corporation purchases debt investments as trading securities at a cost of $150,000 on december 1. this is its first and
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!