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Liula [17]
3 years ago
10

Sixx AM Manufacturing has a target debt—equity ratio of 0.53. Its cost of equity is 19 percent, and its cost of debt is 11 perce

nt. If the tax rate is 32 percent, what is the company's WACC?
Business
2 answers:
Lostsunrise [7]3 years ago
7 0

Answer:

WACC is 14.97%

Explanation:

WACC=Ke*E/V+Kd*D/V*(1-t)

Ke is the cost of equity which is 19% 0r 0.19

Kd is the cost of debt which is 11% or 0.11

t is the tax rate applicable which is 32% or 0.32

D/V=D/E+D where D is the debt while E is teh equity

D/E=0.53 means that D is 0.53 and E is 1

D/V=0.53/(1+0.53)=0.53/1.53=0.35

E/V=1/(0.53+1)=1/1.53=0.65

WACC=0.19*0.65+0.11*0.35*(1-0.32)

WACC=(0.19*0.65)+(0.11*0.35*0.68)

WACC=0.1235 +0.02618

WACC=14.97%

Hence the weighted average cost of capital for Sixx AM Manufacturing is 14.97%

WACC=14.97%

PIT_PIT [208]3 years ago
5 0

Answer:

The WACC of the company is 15.01%

Explanation:

The WACC or weighted average cost of capital is the cost to firm of its capital structure. The capital structure of a firm can have 3 components namely debt, preferred stock and common stock. We take the weighted average of these components and their respective costs to calculate WACC. Moreover, we take the after tax cost of debt.

The WACC for a firm having only debt and common equity will be,

WACC = wD * rD * (1-tax rate)  +  wE * rE

First we need to determine the weightage of each component.

A debt equity ratio of 0.53  means that for every $0.53 of debt there is $1 of equity.

Total assets = debt + equity

Total assets = 0.53 + 1  =  1.53

Weighatge of debt = 0.53 / 1.53

Weightage of equity = 1 /1.53

WACC = 0.53 / 1.53  *  0.11  *  (1-0.32)  +  1 / 1.53  *  0.19

WACC =0.15009 or 15.009% rounded off to 15.01%

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Free Spirit Industries Inc.’s current ratio is 1.3333, and tis quick ratio is 0.7467; Jong Foodstuffs Inc.’s current ratio is 1.
ivolga24 [154]

Answer:

1. Jong Foodstuffs Inc. has a better ability to meet its short-term liabilities that Free Spirit. - TRUE

2. A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities. - TRUE

3. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations. - TRUE

4. Compared to Free Spirit, Jong Foodstuffs has less liquidity and a lower reliance on outside cash flow to finance its short-term obligations. FALSE

5. An increase in the current ratio over time always means that the company’s liquidity position is improving. FALSE

Explanation:

Current Ratio = Current Asset / Current Liabilities

Quick Ratio = (Current Assets – Inventories) / Current Liabilities

The Current Ratio is a liquidity measure that shows the ratio between current asset and current liabilities. It tells how many dollars of the current asset are per dollar of current debts, that gives an idea of the company`s ability to perform its debts.    

The Quick Ratio is also a liquidity indicator, but using its most liquid assets, to pay its current liabilities at maturity. The inventory, although it is a current asset, is not considered, since it cannot be converted into cash in a very short term.

The difference between the Quick Ratio and the Current Ratio, implies that while both are measures of the company's ability to pay its debts, the quick ratio also tells how much the company depends on its inventory to get that objective.

As both ratios are bigger in Jong Foodstuffs Inc.’s case, statement 1 is True and statement 4 is False. Because how ratios are calculated, and the meaning of its terms, statement 2 and 3 are True. And because an increased in current ratio, may implicate a rise in inventory, and therefore a decreased in quick ratio, statement 4 is False.  

5 0
3 years ago
According to the concept of comparative advantage, a good should be produced in that nation where?
snow_lady [41]

According to the concept of comparative advantage, a good should be produced in that nation where its <u>domestic </u><u>opportunity cost</u><u> is the least.</u>

This is further explained below.

<h3>What does the opportunity cost?</h3>

Generally, Opportunity cost, in microeconomics, refers to the value or advantage foregone by doing one action over another.

To put it another way: if you do one thing, you can't do anything other.

In conclusion, Opportunity cost, in microeconomics, refers to the value or advantage foregone by doing one action over another.

To put it another way: if you do one thing, you can't do anything other.

Read more about opportunity cost

brainly.com/question/13036997

#SPJ1

complete question

According to the concept of comparative advantage, a good should be produced in that nation where:

A) its domestic opportunity cost is greatest.

B) money is used as a medium of exchange.

C) its domestic opportunity cost is least.

D) the terms of trade are maximized.

7 0
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Anna007 [38]

its all da same because it just a company

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4 0
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Read 2 more answers
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Kipish [7]

Answer:

C

Explanation:

The recent global boom in the market price for scrap steel and aluminum<em><u> has led to a sudden rise in the theft of everyday metal objects like manhole covers, guard rails, and empty beer kegs. </u></em>

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8 0
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