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
soldi70 [24.7K]
3 years ago
14

[Ch 10] You are the CFO of a company, and you need to analyze a new product line. The company has 8% coupon-bonds outstanding wi

th $1000 face value that trade at par. Their stock, which trades at $25 on the NASDAQ has a beta of 1.25 and just paid a dividend of $3.00 and the dividends are expected to grow at 5% annually, indefinitely. The company has a debt-to-equity ratio of 3 and pays taxes at the 35% annual tax rate. If the expected return on the market is 10% and treasury bills pay 4%, what is the weighted average cost of capital for FIN317 Corp?
Business
1 answer:
Aleksandr [31]3 years ago
4 0

Answer:

Check the following calculations

Explanation:

Bond trade at Par, thus,

Cost of Debt = Coupon rate = 8%

Tax rate = 35%

Post-tax cost of Debt (kd) = 0.08*(1-0.35) = 0.052

Beta of stock = 1.25

Market return = 10%

T-bills rate = 4%

Cost of Equity (ke) = 0.04*1.25*(0.1-0.04) = 0.115

Debt to equity ratio = 3

Weight of Debt (wd) = 3/4 = 0.75

Weight of equity (we) = 0.25

WACC= wd * kd+ we *ke

WACC =0.75* 0.052+0.25* 0.115

WACC =0.06775

WACC= 6.76%

Please note: In above solution, CAPM model used to determine the cost of equity because CAPM model gives minimum required return by equity investors.

You might be interested in
Movie studios use market research to reduce their risk of losses by hiring firms such as the National Research Group to conduct
LenaWriter [7]

Answer:

The answer is: B) critique the title, plot and characters

Explanation:

Obviously the movie is almost finished when these prospective moviegoers attend an sneak preview, so the studios can only change a little of the movie depending on the reviews.

That is why they seek information on the title, plot and characters.

The title can be modified (it will cost extra money), but if necessary, it is something that can be done. A famous example is "The Return of the Jedi" whose original name was the "The Revenge of the Jedi".

The plot and the characters are things that can change a little by reediting the movie. Let's use Star Wars again as an example, George Lucas deleted characters from Episode III at the last moment because they weren't appropriate for young audiences. Again this is an expensive process digitally done.

Very few times the regular moviegoers get to see the full movie, sometimes the full movie is released later including the parts that were cut during editing, Avengers End Game added 30 extra minutes a few months after the release.

5 0
3 years ago
The tendency to search for information consistent with our preconceptions is called: A. functional fixedness B. the representati
REY [17]

Answer:

D, confirmation bias

Explanation:

Confirmation bias is a form of cognitive bias that is defined as the tendency to interpret ,search, recall an information that confirms one's previous personal belief.

For example, if you suspect that a friend of yours is a thief after some things went missing a few times after he left you place and then someone else tells you he is also suspecting that same friend of being a thief, your confidence bias immediately connects both situations and then you believe your friend is a thief.

I hope this helps.

8 0
4 years ago
Blur Corp. has an expected net operating profit after taxes, EBIT(1 – T), of $7,600 million in the coming year. In addition, the
Zina [86]

Answer:

Free cash flow (FCF) for next year = $ 6,450  million

Explanation:

<em>Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures.</em>

<em>It is computed as cash flow made from operation less capital expenditures</em>

For Blur Communications

The Free cash flow

= EBIT (1-T) - increase in capital expenditure - increase in working capital

= 7600 - $1,140 - 10

= $ 6,450  million

Free cash flow (FCF) for next year = $ 6,450  million

6 0
3 years ago
Read 2 more answers
Pastoria Enterprises has scheduled raw material purchases of $100,000 in January, $130,000 in February, and $150,000 in March. T
IRINA_888 [86]

Answer:

B

Explanation:

The question asks to calculate how much will be disbursed by the company in February.

Firstly , we know that the company disburses 75% in the month of purchase and 25% during the month after purchase.

Now, 75% of $130,000 would be disbursed as February’s own payment:

Mathematically 75/100 * 130,000 = 97,500

Also, we should not forget that the company disburses 25% of previous month during the current. That is 25/100 * 100,000 = 25,000

Total amount disbursed is thus 25,000 + 97,500 = $122,500

6 0
3 years ago
\Stock A, an average stock, has an expected return of 10 percent. Stock B has a beta of 2.0. Portfolio P is a two-stock portfoli
miv72 [106K]

Answer:

KSHSAKEJHRHSAHJWKWNZBSNN

Explanation:

HDUDABEBFNFJZ

4 0
3 years ago
Other questions:
  • Prepare budgetary entries, using general ledger control accounts only, for each of the following unrelated situations: (If no en
    14·1 answer
  • Russia and china are both rich in natural resources and human resources, and both countries have a solid level of capital. yet,
    10·1 answer
  • During January of Year 6, Doe Corp. agreed to sell the assets and product line of its Hart division. The sale was completed on J
    13·1 answer
  • When considering your financial situation you should consider
    8·2 answers
  • In the downstream segment of the supply chain, managers coordinate the receipt of orders from customers, develop a network of wa
    7·1 answer
  • Collins Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The f
    14·1 answer
  • Wheeling Inc. uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging a
    10·1 answer
  • Firm X develops and licenses its designs to be produced by outside manufacturers. Firm Y develops and manufactures its own desig
    5·1 answer
  • A clothing company is planning an event in which it will provide clothes to homeless children in countries where the company has
    14·1 answer
  • The ________ adopted an elaborate form of interest arbitration, known as the Experimental Negotiating Agreement, in the 1970s as
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!