Answer:
Cost of debt (Kd) = 6.1%
Cost of preferred stock = <u>Dividend paid</u>
Current market price
= $2.53
$33
= 0.0767 = 7.67%
Risk-free rate (Rf) = 2.2%
Beta (β) = 1.11
Market risk premium (Rm - Rf) = 6.7%
Cost of equity (Ke) = Rf +β(Rm - Rf)
Cost of equity (Ke) = 2.2 + 1.11(6.7)
Cost of equity (Ke) = 9.637%
WACC = Kd(D/V)(1-T) + Kp(P/V) + Ke(E/v)
WACC = 6.1(39 /100)(1 -0.35) + 7.67(11/100) + 9.637(50/100)
WACC = 1.55 + 0.84 + 4.82
WACC = 7.21%
Explanation:
In this case, cost of debt has been given. Cost of preferred stock is calculated as current dividend paid divided by current market price.
Cost of equity is calculated based on capital asset pricing model, which is Risk-free rate plus beta multiplied by the market risk premium.
WACC equals after-tax cost of debt multiplied by the proportion of debt in the capital structure plus cost of preferred stock multiplied by the proportion of preferred stock in the capital structure plus cost of equity multiplied by proportion of equity in the capital structure.
Answer:
$ 615,000
Explanation:
Data provided :
Capital budget = $ 650,000
Debt ratio = 40%
Equity ratio = 60%
thus,
The capital funded by the equity = 60% of the capital = 0.6 × $ 650,000
= $ 390,000
Dividend to be paid = $ 225,000
Therefore,
the net income must be earned = $ 390,000 + $ 225,000
or
The net income must be earned = $ 615,000
Shareholders' Equity = Assets – Liabilities where the rearrangement reflects the residual claim of equity owners.
Business net income $130,000
Dividends $2,000
Long-term capital gain $5,000
Short-term capital loss $10,000
$130,000 + $2,000 + $5,000 = $137,000
$137,000 - $10,000 = $127,000
Based on my these figures, Barton’s taxable income is $127,000.
Answer:
Explanation:
<u>First - if we upgrade the Car</u> :
Current cost of fuel in car - 12000/25*2.65 = 1272$
after upgrading the car , cost of fuel in car - 12000/40*2.65 = 795$
Net saving in fuel cost - 1272-795 = 477$
<u>Second - if we upgrade the Truck </u>:
Current cost of fuel in truck - 12000/10*2.65 = 3180$
after upgrading the truck , cost of fuel in truck - 12000/12.5*2.65 = 2544$
Net saving in fuel cost - 3180-2544 = 636 $
So, we should upgrade the truck, because it will give more saving in fuel cost.
ANNUAL FUEL SAVINGS IN GALLONS:
CAR - 477/2.65 = 180 GALLONS
TRUCK - 636/2.65 = 240 GALLONS
