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DanielleElmas [232]
3 years ago
14

ABC Corporation has the following information: Total market value of a company’s stock: $650 million Total market value of the c

ompany’s debt: $150 million Cost of Equity: 10% Cost of Debt: 8% Corporate tax rate is 35 percent What is the WACC of ABC Corporation?
Business
1 answer:
Jobisdone [24]3 years ago
7 0

Answer:

WACC of ABC Corporation is 91%

Explanation:

WACC = Kd * (1+T) * Debt/Debt+Equity + Ke * Debt/Equity

Kd = Cost of debt

T = Corporate tax rate

WACC = 0.08*(1-0.35)*(150m/150m+650m) + 0.10*(650m/150m+650m)

WACC = 0.08 *0.65*0.1875 + 0.10*0.8125

WACC = 0.00975 + 0.08125

WACC = 0.091

WACC = 91%

Therefore, the WACC of ABC Corporation is 91%

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ABC, Inc. discounts a 5%, 9-month, $1,000 note with a financial institution after holding the note for 3 months. The note was re
Gnoma [55]

Answer:

interest receivable   12.50    debit

     interest revenue     12.50 credit

--adjusting entry for the interest accrued--

interest expense      11.31 debit

cash                     1,001.19 debit

     note receivable             1,000.00 credit

     interest receivable             12.50 credit

--to record early discount of the note--

Explanation:

We are going to write-off the note and check for the interest expense:

book value of the note:

principal  + interest accrued

principal x rate x time = interest

1,000 x 0.05 x 3 months/12 month a year  = 12.50

we had interest receivable for 12.50

1,000 + 12.5 = 1,012.5 we receive 1,001.19

interest expense: 11.31

We are following this process to avoid compensate balance as is the company earned interest during those three months and then it pay interest to get cash earlier.

8 0
3 years ago
A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in retained earnings. what
belka [17]
Hi Ddestinyclark8385, 

<span><u>A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in retained earnings. what is the balance in the contributed capital accounts?</u>
</span>b. $32.000
7 0
3 years ago
Based upon the following data, which of the following mutually exclusive projects should you choose if your required return is 1
scoray [572]

Answer:

d

Explanation:

Net present value is the present value of after tax cash flows from an investment less the amount invested.  

NPV can be calculated using a financial calculator  

Investment A

Cash flow in year 0 = -$150

Cash flow in year 1 = $80

Cash flow in year 2 = $40

Cash flow in year 3 = $40

Cash flow in year 4 = $30

I = 10%

NPV = 6.33

Investment A

Cash flow in year 0 = -$150

Cash flow in year 1 = $40

Cash flow in year 2 = $50

Cash flow in year 3 = $60

Cash flow in year 4 = $55

I = 10%

NPV = 10.33

Project B has a higher NPV and it should be chosen

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

7 0
3 years ago
Assume Clarks cannot estimate the standalone selling price of a pair of SunBoots sold without a coupon. Prepare a journal entry
kicyunya [14]

Answer and Explanation:

The journal entry is shown below:

Cash Dr (1,000 × $65) $65,000  

     To Sales revenue $59,000  

     To Deferred Revenue -Discount coupon  $6,000

(1,000 × $100 × 30% × 20%)

(Being the sales revenue is recorded)

here the cash is debited as it increased the assets and credited the sales revenue and deferred revenue as it increased the revenue and liabilities

7 0
2 years ago
Accounting for lean operations requires fewer transactions because
Shtirlitz [24]
Lean operations including manufacturing and production are a system to minimize waste. This system works proactively and tries to limit the amount of productivity being wasted to manufacture items. Less transactions are needed in this system being they are efficient throughout the organization. 
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3 years ago
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