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
anyanavicka [17]
3 years ago
10

Frankenstein Electric has a capital structure that consists of 60 percent equity and 40 percent debt. The company's long-term bo

nds have a before-tax yield to maturity of 7 percent. The company uses the DCF approach to determine the cost of equity. Frankenstein's common stock currently trades at $40 per share. The year-end dividend is expected to be $2 per share, and the dividend is expected to grow forever at a constant rate of 9 percent a year. The company estimates that it will have to issue new common stock to help fund this year's projects. The flotation cost on new common stock issued is 15 percent, and the company's tax rate is 40 percent. What is the company's weighted average cost of capital, WACC?A. 11.7%B. 10.1% C. 8.9% D. 11.0% E. 10.6%
Business
1 answer:
Alexeev081 [22]3 years ago
8 0

Answer:

Kd = 7%

Ke =      D1      +  g

        Po(1 - FC)

Ke =      $2            + 0.09

        $40(1 - 0.15)

Ke =       $2      +  0.09

              $34

Ke = 0.1488 = 14.88%

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

WACC = 14.88(60/100) + 7(40/100)(1 - 0.40)

WACC = 8.928 + 1.68

WACC = 10.6%

Explanation:

In this case before-tax cost of debt is given. Cost of equity is expected dividend divided by current market price after flotation cost plus growth rate. WACC is calculated as cost of equity multiplied by the proportion of equity in the capital structure plus after-tax cost of debt multiplied by proportion of debt in the capital structure.

You might be interested in
Market anomaly refers to _______.A. an exogenous shock to the market that is sharp but not persistentB. a price or volume event
Klio2033 [76]

Answer:

the correct answer is C. A trading or pricing structure that interferes with efficient buying and selling of securities.

Explanation:

7 0
3 years ago
The accounts used by a business can be kept on pages or cards, which are kept together in a book or file called a(n) ___________
mel-nik [20]
The accounts used by a business can be kept on pages or cards, which are kept together in a book or file called .. Ledger.
8 0
2 years ago
According to the conceptual framework, the objectives of financial reporting for business enterprises are based on.
poizon [28]

Financial reporting objectives for companies, according to the conceptual framework, are based on user needs, to be used as a periodic assessment of organizational performance.

<h3 /><h3>Financial reports</h3>

Responsible for supporting organizational decision-making, their objective is to analyze, monitor and report the performance of an organization, to determine the financial health of the business, demonstrate transparency and assist in the decision-making process.

Therefore, financial reporting objectives are based on user needs, ie a company uses such reports to measure performance, determine projections, analyze resource utilization and make more effective decisions.

Find out more information about financial reports here:

brainly.com/question/4954869

3 0
2 years ago
Which form do businesses use to determine the number of deductions for an
riadik2000 [5.3K]

Answer:

C. W-4

Explanation:

The W-4 form acts as the Employee’s Withholding Allowance Certificate. The employee completes the form and hands it over to the employer, who uses it to calculate how much income tax to withhold.

The details on the W-4 forms are necessary for tax computation. For instance, the employee declares their marital status and the number of dependents; this determines the applicable tax rates.

6 0
2 years ago
Read 2 more answers
What are benefits of using OneDrive to store presentations? Check all that apply. It has syncing capabilities. It is affordable
Andru [333]

Answer:

A, C, D, E

Explanation:

edge

8 0
2 years ago
Read 2 more answers
Other questions:
  • What is a reason why someone would use a secured credit card?
    8·1 answer
  • Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $74,000 and $3,900, r
    8·1 answer
  • If per capita gdp in 2014 was $900, in 2015 was $1,000, and in 2016 was $1,200, the growth rate of per capita gdp between 2014 a
    11·1 answer
  • Marker Corp. exchanged an old truck for a piece of equipment and cash on January 1st 2019. The truck was purchased at a cost of
    6·1 answer
  • Robin is working with a little autistic boy, trying to increase the amount of eye contact he can provide. She says, "Look at me.
    13·1 answer
  • An investor contributes $100,000 of cash to a partnership and signs a $200,000 recourse note. During the first year, the investo
    5·1 answer
  • Stores that carry a broad product line, with limited depth, are referred to as
    8·1 answer
  • May 31, 2018 June 30, 2018
    5·1 answer
  • The following is an example of the moral-hazard problem: Homebuyers do not properly evaluate the risks involved in buying a home
    6·1 answer
  • The practice of using team selling to focus on important customers so as to build mutually beneficial, long-term, cooperative re
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!