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
vodka [1.7K]
3 years ago
10

A firm has zero debt in its capital structure. Its unlevered cost of capital is 9%. The firm is considering a new capital struct

ure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, its cost of levered equity with the new capital structure would be?
Business
1 answer:
meriva3 years ago
4 0

Given:

Weighted average cost of capital (WACC) = 9%

Debt in capital structure = 40%

Interest on debt = 4%

Corporate tax rate = 34%

Find:

Cost of Equity:

Computation:

WACC = [Debt in capital structure × Interest on Debt (1-Corporate tax rate)] + [Cost of Equity × (1 - Debt in capital structure)]

9% = [ 40% × 4% (1-34%) ] + [Cost of Equity × (1 - 40%)]

0.09 = [ 0.40 × 0.04 (0.66) ] + [Cost of Equity × (0.60)]

0.09 = [ 0.01056 ] + [Cost of Equity × (0.60)]

0.07944 = [Cost of Equity × (0.60)]

Cost of Equity = 0.1324

Cost of Equity = 13.24% (Approx)

You might be interested in
What would $250000 make per year in a savings account?
Mumz [18]
It would make you $7,500

because banks usually pay a person $0.03 for every dollar

250,000 times .03 equals 7,500
6 0
3 years ago
Survey
qaws [65]
<span>1. When John received his W2, he received several copies. Why was he sent multiple copies of this form?

The different copies are for John and each tax return he may file

2. Who sent John this W-2?

John's employer - ProperLiving Widget Engineering & Design


3. How much did John make in wages in the 2014 tax year? (assuming this was John's only job)

I do not know

4. How much did John 'take home' in net pay? (assuming this was John's only job)

I do not know


5. How much did John save in his 401(k) in the 2014 tax year?
I do not know


6. Assume your employer provides health care insurance and deducts your portion of the premiums from your paycheck with pre-tax dollars. Are your health insurance premiums federally tax deductible?
Yes


8. Select what would happen to your 1) taxable income and 2) tax liability when you are able to claim a deduction such as student loan interest?

1) lower 2) higher


9. Which are tax deductible?

Student loan payments


</span>
4 0
3 years ago
A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed
VLD [36.1K]

Answer:

A farmer is the one that owns the cattle and is ready to sell it on the market demand, while the meatpacker is the one who buys the product and sells it in different parts to the end consumers.

Since they both are using the commodity market to reduce the risk, the farmer will be the one who agrees to sell the cattle in the future at a fixed rate, while the meatpacker will be the one who agrees to buy the cattle in the future at a specified price fixed by him.

Hope this helps. ThankYou.

3 0
2 years ago
Public debt includes debt that is held by:________
ELEN [110]

The answer is Public debt includes debt that is held by the social security Administration.

Public debt is the total amount, including total liabilities, borrowed by the government to meet its development budget.

What is Public debt?

  • Public debt has to be paid from the consolidated fund of India. It is also used to refer overall liabilities of central and state governments, but the union government clearly distinguishes its debt liabilities from the state.
  • The sources of public debt are dated government securities (G-Secs), treasury bills, external assistance, and short term borrowings.
  • However, if the public debt is calculated as government liabilities, which also includes the liabilities of states.

To learn more about Public debt

Visit: brainly.com/question/27648457?

#SPJ4

7 0
1 year ago
Howes inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. if the firm chooses to pay on
Scorpion4ik [409]

Answer: The cost of non-free trade credit is 23.45%

We follow these steps to arrive at the answer

We have:

Discount Rate     2%

First we find \frac{Discount Rate}{1 - Discount Rate}.

\frac{Discount Rate}{1 - Discount Rate} = \frac{0.02}{1 - 0.02}

\frac{Discount Rate}{1 - Discount Rate} = \frac{0.02}{0.98} = 0.020408163

Adding 1 to the number above we get 1.020408163

Next we'll find the number of extra credit days after the discount period.

Extra credit days = Total credit days - Discount period

Extra credit days = 50 - 15 = 35 days

Next we need to raise 1.020408163  to the fraction of 365/35. We get

1.020408163^{ 365/35} = 1.234523883

Finally we need to deduct 1 from the number above to get 1.234523883 -1 = 0.234523883

We express the number above as a percentage to arrive at the cost of non-free trade credit.

4 0
3 years ago
Other questions:
  • What happens to consumption and investment spending when the Federal Reserve decreases the money supply
    13·1 answer
  • Which investment has the liquidity and can be converted into cash easily?
    14·2 answers
  • Suppose​ Mary, the owner of the Chic Dress​ Shop, says to​ Peter, a​ painter, "If you promise to paint my store by July​ 1, I wi
    12·1 answer
  • Cardinal Industries had the following operating results for 2018: Sales = $34,318; Cost of goods sold = $24,212; Depreciation ex
    15·1 answer
  • (c)
    8·1 answer
  • A flour manufacturer is more likely to use process costing than job-order costing whereas a manufacturer of customized leather j
    15·1 answer
  • What is purpose of public relations?
    13·2 answers
  • In the cost reconciliation report under the FIFO method, the costs to be accounted for equals the cost of beginning work in proc
    9·1 answer
  • For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as foll
    8·1 answer
  • Earnings per share should always be shown separately for:.
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!