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
Bretthauer Corporation has provided data concerning the Corporation's Manufacturing Overhead account for the month of July. Prio
Elanso [62]

Answer:

b. Manufacturing overhead applied to Work in Process for the month was $66,000

Explanation:

In posting the journal entries for a manufacturing company, the total of the amount on the credit side of the Manufacturing Overhead account represents the amount applied to and to be posted to the debit side of the Work in Process to complete the double entries.

Therefore, the correct option form the question is b. Manufacturing overhead applied to Work in Process for the month was $66,000.

7 0
2 years ago
Jimmy John's sandwiches claim to have "Freaky Fast" delivery. This ________, which refers to the place a product occupies in con
Salsk061 [2.6K]

Answer:

D) Product Positioning

Explanation:

Product positioning is the process used by marketers to communicate about their products to targeted customers. They focus primarily on the needs of the customers, availability of the channels for communication and attributes of the products. It enables the target customers to receive all the messages and update regarding the business and ask them to take the necessary steps accordingly.

7 0
3 years ago
Martinez Company has an old factory machine that cost $66,000. The machine has accumulated depreciation of $36,960. Martinez has
brilliants [131]

Answer:

Journal entries

Explanation:

The journal entries are as follows

(a) Cash A/c Dr $33,000

   Accumulated depreciation A/c Dr $36,960

            To Factory machine A/c $66,000

            To Profit on sale of factory machine A/c $3,960

(Being the sale of machinery is recorded and the remaining balance is credited to the profit on sale of factory machine account)

(b) Cash A/c Dr $19,800

    Loss on sale of factory machine A/c $9,240

    Accumulated depreciation A/c Dr $36,960

            To Factory machine A/c $66,000

(Being the sale of machinery is recorded and the remaining balance is debited to the loss on sale of factory machine account)

8 0
3 years ago
Camp Elim obtains a $125,000, 6%, five-year installment note for a new camp bus on January 1, 2021. The note requires monthly in
kirza4 [7]

Answer:

Option (B) is correct.

Explanation:

The Journal entry is as follows:

Interest expense A/c Dr. $625

Note payable A/c       Dr. $1791.60

To cash                                            $$2,416.60

(To record the first month’s payment on January 31, 2021)

Working notes:

Monthly interest expense:

= (Note payable × Interest rate per annum) ÷ 12 months

= ($125,000 × 6%) ÷ 12 months

= $625

Note payable = $2,416.60 - $625

                       = $1,791.60

5 0
2 years ago
Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroec
avanturin [10]

Answer:

b. The expected rate of return on U.S. assets rises

Explanation:

  • An open economy is one that interacts freely with the other economies of the world, the one economy of the united states is very large and includes the imports and exports of huge quantity including the goods and services.
  • In an open economy, macroeconomic model assets are bought and supplied to the economy a this creating an outflow of the capital as more of the buying of the assets creates a net capital outflow leading to an increase of the expected rate of return of assets. As the country can spend more than it produces.
7 0
3 years ago
Other questions:
  • A merchandiser has sales discounts forfeited of​ $600, cost of goods sold of​ $13,000, and other expenses of​ $4,100. The mercha
    13·1 answer
  • Being a​ ________ is a major factor underlying repeat sales.
    6·1 answer
  • When a firm initiates a price​ decrease, it must seriously consider how competitors will react. although not all competitors are
    5·1 answer
  • On March 1, Bartholomew Company purchased a new stamping machine with a list price of $83,000. The company paid cash for the mac
    10·1 answer
  • Customers are usually more willing to pay more for the first unit of a good they purchase than for the​ second, third, or subseq
    13·1 answer
  • One disadvantage of an environment of low interest rates is that<br><br><br>​
    15·2 answers
  • The accounts payable account is listed in the chart of accounts as an asset.<br> True<br> False
    10·1 answer
  • Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as​ follows:Direct materi
    5·1 answer
  • The advantage to savers and investors of receiving compound interest rather than simple interest is that future values are large
    8·1 answer
  • List three impulse convenience goods that you or someone you know has purchased
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!