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
Daniel [21]
3 years ago
5

Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is

6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Avery's WACC? Select one: a. 8.15% b. 8.48% c. 8.82% d. 9.17% e. 9.54%
Business
1 answer:
RoseWind [281]3 years ago
5 0

Answer:

a. 8.15%

Explanation:

In order to find the WACC we will multiply the cost of each type of capital source and multiply it by it's weight

Common Equity = Weight of equity * Cost of equity

=0.55*0.1125=0.061875=6.1875%

Preferred stock= Weight of preferred stock*yield of preferred stock

0.10*0.06=0.006= 0.6%

Debt= Weight of debt*interest rate*(1-tax rate)

=0.35*0.065*(1-0.4)

=0.01365=1.365%

Add all of these to find WACC

6.1875+1.365+0.6= 8.15%

You might be interested in
A car insurance policy has a $500 deductible for comprehensive coverage and a $1000
Alexus [3.1K]
$1500 will be paid by the Insurance policy as the accident has lead to $725 damage to John’a car which will be covered up to $500 (full amount that insurance can pay), leaving him to pay off the rest. As for the liability that is worth $1525 so insurance will pay what it can which is $1000, leaving John to pay off the remaining amount. So the insurance is paying $1500 ($500 comprehensive coverage plus $1000 liability coverage)
7 0
3 years ago
Read 2 more answers
Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours.
poizon [28]

Answer:

$165

Explanation:

Opportunity cost is the cost (or benefit lost) from choosing one activity or investment over another. In this case, if you decide to prepare your own tax report instead of paying a tax specialist, then your opportunity cost = 15 hours x $11 per hour = $165. By preparing your tax return yourself, you are losing 15 hours and you value your time at $11 per hour.

4 0
3 years ago
What impact would the fed's raising the interest rate have on any inflationary pressure in the economy?
Licemer1 [7]

People will eventually start cutting back on their spending since increased interest rates result in greater borrowing costs. Then, when the demand for goods and services declines, so does inflation.

Interest and other expenses incurred by an entity in conjunction with borrowing money are referred to as borrowing costs. An asset that requires a significant amount of time to prepare for use or sale qualifies as a qualifying asset.

A qualifying asset's cost includes borrowing expenses that are directly related to its purchase, construction, or production. The expense of other borrowing costs is recognized.

The fundamental tenet of IAS 23 Borrowing Costs is that if borrowing costs can be directly linked to the purchase, development, or production of a qualifying asset, they should be capitalized. Additional borrowing expenses are deducted from profit or loss.

Learn more about borrowing costs here

brainly.com/question/3896224

#SPJ4

8 0
2 years ago
Which kind of stock would you expect to pay the higher average return: stock in an industry that is very sensitive to economic c
BlackZzzverrR [31]

Answer:

Risk return you expect to pay high average return since it will give us better economic conditions.

6 0
3 years ago
Pina Colada Corp. had the following transactions during 2022:
LenaWriter [7]

Answer:

D. $(254100)

Explanation:

CASH FLOW FROM FINANCING ACTIVITIES:

<em>Cash Receipts From:</em>

1. Issuance of Stock                                                      $302,500

<em>Cash Paid For:</em>

4. Dividend                                                                     $(24,200)

10. Repayment of Loan                                                $(532,400)

Net Cash Flow from Financing Activities                  $(254,100)

2. It is Operational Activity.

3. It is Investing Activity.

5. It is Investing Activity.

6. It is Operational Activity.

7.  It is Operational Activity.

8.  It is Investing Activity.

9.  It is Investing Activity.

7 0
3 years ago
Other questions:
  • On july 1, tau, inc., purchased a machine for $12,000 and issued in payment a one-year note payable for $13,200. on august 31, t
    7·1 answer
  • There are four major traits of entrepreneurs: Passion, Executive intelligence, Customer focus and Tenacity (PECT). Rank the four
    6·1 answer
  • An investment of $10,000 has an investment/inflow ratio of 6.2 and a useful life of12 years. What are the annual cash inflow and i
    5·1 answer
  • From 2010 to 2011 nation a's real gdp increased from $100 billion to $106 billion and its population grew from 50 million to 51
    13·1 answer
  • Setting a price ceiling below the equilibrium price can result in:
    11·1 answer
  • Risks commonly considered to understand project financing are:
    10·2 answers
  • A firm has three different production facilities, all of which produce the same product.. While reviewing the firm's cost data,
    12·1 answer
  • Expected cash dividends are $4.00, the dividend yield is 8%, flotation costs are 6% of price, and the growth rate is 5%. Compute
    9·1 answer
  • A firm that shuts down temporarily has to pay a. its fixed costs but not its variable costs. b. its variable costs but not its f
    5·1 answer
  • Better products, inc., manufactures three products on two machines. in a typical week, 40 hours are available on each machine. t
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!