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Pani-rosa [81]
3 years ago
8

You are a finance intern at Chambers and Sons and they have asked you to help estimate the company's cost of common equity. You

obtained the following data: D1 = $1.25; P0 = $27.50; gL = 5.00% (constant); and F = 6.00%. What is the cost of equity raised by selling new common stock?
Business
1 answer:
koban [17]3 years ago
4 0

D1 = $ 1.25

P0 = $ 27.50

g = 5 % = 0.05

F = 6 % = 0.06

Cost of equity, re = D1/ {P0 x (1- F)} + g

                             = $ 1.25 / {$ 27.50 x (1- 0.06)} + 0.05

                             = $ 1.25 / ($ 27.50 x 0.94) + 0.05

                             = $ 1.25 / 25.85 + 0.05

                           = 0.048356 + 0.05

                           = 0.098356 or 9.84 %

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Answer:

b) The cost of the building will include the cost of replacing the roof.

Explanation:

As for the information provided,

We know that the capital expenditure is capitalized and that the revenue expenditure is provided in income statement.

The capital expenditure is added in the cost of fixed assets and then depreciated as part of it.

The entire replacement of roof will be a huge part of consideration of building, and is capital in nature. Thus, it shall be part of cost of building.

Remaining all expenses are not capital in nature.

3 0
3 years ago
On December 31, 2017, Extreme Fitness has adjusted balances of $980,000 in Accounts Receivable and $91,000 in Allowance for Doub
m_a_m_a [10]

Answer:

Account receivable = $889,000

Explanation:

The company would record as net receivables, the total amount on accounts receivable less total amount on the allowance for uncollectible account.

The above means that the balance would represent the amount of credit that has gone bad hence the value represent balance on net receivable account.

Therefore,

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3 0
3 years ago
Interest rates and decisions
svetoff [14.1K]

Answer:

a. No, the firm needs to take the volatility of short-term rates into account.

Explanation:

Short term interest rates are more volatile than the long term interest rates. If the company chooses to finance its operations solely from short term financing than it will need to incorporate the affect of volatility in the short term interest rates to identify the net returns. The volatility should be calculated with the risk factor and required rate of return of the funds.

4 0
3 years ago
A task performed by an organization or organizational subunit in support of the organization's overall mission is referred to as
Mars2501 [29]

Answer:

business process

Explanation:

Business process are plans, task that are carried out by an organization or its subunits whose end result is to attain the goals of the organization. Business process are often times a repetition of certain work processes, which is subject to continuous update for effective result.

Some aspects of business process includes business support; which provides support to the business arm of a firm in terms of processing while operational process is the major business part of the business process.

5 0
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katrin [286]

Answer:

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so correct option is D. discount rate.

6 0
3 years ago
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