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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)

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harina [27]

Answer:

b. supply of dollars in the market for foreign-currency exchange shifts left

Explanation:

In the case when the expected return on the US assets should be rise while keeping other things constant so it reduced the dollar supply because the investors in US would begins switching the international investment to the domestic due to this it reduced the supply. This cause to shifting the supply curve to the left

Therefore the option b is correct

8 0
3 years ago
The records of Lohse Stores included the following data: Inventory, May 1, at retail, $14,500; at cost, $10,440 Purchases during
bulgar [2K]

Answer:

$9,3

Explanation:

                             COST    RETAIL    RATIO

Inventory, May 1 $10,440        $14,500 .72

Purchases           31,550            42,900

Freight-in          2,000

Purchase discounts

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Net markups                                  3,400

Net markdowns                           (1,300)

Totals excluding beginning inventory

                        33,300                45,000   .74

Goods available $43,740          59,500

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Inventory, May 31                         $13,000

Estimated inventory, May 31

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3 0
3 years ago
The share price falls when a dividend is paid because the reduction in cash decreases the?
sesenic [268]

The share price falls when a dividend is paid because the reduction in cash decreases the market value of assets.

After a stock price goes ex-dividend, the share price in the market typically decreases by the amount of the dividend paid in order to reflect the fact that new shareholders there are not entitled to that payment.

In the market, when the dividends are paid out as stock instead of cash, then this can dilute earnings, which can also have a negative impact on share prices in the short term.

Hence, there is still no direct connection between a company's dividend and its stock price.

To learn more about dividends here:

brainly.com/question/2960815

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2 years ago
You are a real estate owner in Bloomington Indiana and you have rented a house to students. You expect to make 6% per year on th
Lyrx [107]

Answer:

The present value of the contract is 0.5% higher if the rent is paid at the beginning of the month. That is equal to $11.28 for every $100 of rent.

Explanation:

if the rent is paid at the beginning of the month, the present value of the lease contract will be:

PV = monthly rent x PV annuity due factor

we are not given the monthly rent, but we know the PV annuity due factor for 0.5% and 24 periods = 22.67568

if the rent is paid at the end of the month, the PV = monthly rent x PV ordinary annuity factor

the PV ordinary annuity factor, 0.5%, 24 periods = 22.56287

assuming that the rent is $100 (just to calculate a %), the PV of an annuity due = $2,267.57

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7 0
3 years ago
Assume your goal in life is to retire with $2,500,000. How much would you need to save at the end of each year if interest rates
LUCKY_DIMON [66]

Answer:

Annual deposit= $60,982.31

Explanation:

Giving the following information:

Future Value= $2,500,000

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FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (2,500,000*0.07) / [(1.07^20) - 1]

A= 60,982.31

4 0
3 years ago
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