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Darya [45]
3 years ago
13

Use the data provided on Cadbury to answer the question below. The risk free rate is​ 4.25%. The expected return on the market p

ortfolio is​ 9.75%. The corporate tax rate is​ 40%. The face value of​ Cadbury's outstanding bonds is 2.450 billion pounds sterling. The coupon rate on​ Cadbury's bonds is​ 4.5%. Assume that the bonds pay annual coupons. The yield to maturity on​ Cadbury's bonds is​ 4.5%. Cadbury's bonds mature in 7 years. Cadbury has 1.650 billion common shares outstanding. The market price of​ Cadbury's common shares as of Dec​ 31, 2008 is 6.25 pounds sterling.​ Cadbury's Beta is 0.8.​ Cadbury's cost of debt ​(afterminus ​tax) is​ 2.7%. Cadbury's cost of equity is​ 8.65%. What is​ Cadbury's WACC?
Business
1 answer:
Sladkaya [172]3 years ago
4 0

Answer:

7.51%

Explanation:

The formula to compute WACC is shown below:

= (Weightage of debt) × (after cost of debt) + (Weightage of  common stock) × (cost of common stock)

where,  

Weighted of debt = Debt ÷ total firm

The total firm includes debt, and the equity which equals to

= 2.450 billion × $ 1 + 1.650 billion × $6.25

= 2.450 billion + 10.3125 billion

= 12.7625 billion

So, Weighted of debt = ($2.450 billion ÷ $12.7625 billion) = 0.192

And, the weighted of common stock = (Common stock ÷ total firm)

                                                              = $10.3125 billion ÷ $12.7625 billion

                                                              = 0.808        

Now put these values to the above formula  

So, the value would equal to

= (0.192 × 2.7%) +  (0.808 × 8.65%)

= 0.5184% + 6.9892%

= 7.51%

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The correct answer is the option A: External sources.

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b. , c. , and e.

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U.S. businesses are known for their technological advances and their ability to implement change true false
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Answer:

U.S. businesses are known for their technological advances and their ability to implement change;

True

Explanation:

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7 0
3 years ago
Bruner Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2014, Bruner start
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Answer:

The amount of gross profit to be recognized in 2014 is $1,400,000

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Percentage-of-completion (POC) is a revenue recognition method that is used to estimate revenue to be recognized for each accounting period when carrying out a long term contract. This method estimates revenue based on the completion of the long term contract in comparison with the total contract cost in the accounting period. Here is the formula:

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So the gross profit will be

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$14,000,000 - $12,600,000

= $1,400,000

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