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
A sample of 14 students was selected to estimate the average score in a given quiz. The average score in the sample is 2.14 with
Savatey [412]

The average score of the student in the class at a 99% confidence lies between 1.252 and 3.028

Explanation:

Given values are

n = 14   = 2.14     σ = 1.29  z value for 99% confidence = 2.576

The mean is known one

= (z σ/√14)

=  (2.576 ×1.29÷√14)

(2.576 ×1.29÷√14)

= 2.576 × 0.345

= 0.888

 =  mean- 0.888 = 2.14  - 0.888 = 1.252

 =  mean+0.888 =  2.14 + 0.888 = 3.028

The average score of the students in the class at a 99% confidence lies between 1.252 and 3.028

6 0
3 years ago
What are the advantages of trimming of fruits ?write​
soldier1979 [14.2K]
Trimming helps to remove dead or weak branches, and as a result help new and healthy flowers and buds to grow.
6 0
3 years ago
Sebastian Wayne's filing status is married filing jointly, and he has earned gross pay of $3,940. Each period he makes a 401(k)
Artist 52 [7]

Answer:

Social Security Tax = $ 244.28

Medicare tax = $ 57.13

Explanation:

Social Security Tax: $3,940 x 6.20% = $244.28

Medicare tax: $3,940 x 1.45% = $ 57.13

4 0
3 years ago
You are the IT director at Attaway Airlines, a small regional air carrier. You chair the company's systems review committee, and
Masja [62]

<u>Explanation:</u>

Been the IT director at Attaway Airlines, it will be important to prepare a draft of the advantages and the level of difficulties the new computerized reservation system from an IT perspective.

However, the ultimate goal is not to simply win arguments, but to explain and consider the facts from both the Vice president of finance and the Marketing Manager.

4 0
3 years ago
The following data is available for Blaine Corporation at December 31, 2012: Common stock, par $10 (authorized 25,000 shares) $2
uysha [10]

Answer:

a) b.20,000

b) b.20,000

Explanation:

a) Number of common stocks issued = 200,000/10

                                                              = 20,000

So, 5000 stocks remain with company.

Number of common stocks outstanding = 20000

b)  b. 20,000                                                                

7 0
3 years ago
Other questions:
  • If a marketing manager queries a marketing information system to determine the effect of three different levels of price for a n
    14·1 answer
  • Entrepreneurs are willing to take risks becausea. technology provides a way to sidestep the patent and copyright system.b. the p
    8·1 answer
  • The _____, or potential exposures, possible in a medium is arrived at by multiplying the medium's total audience size by the num
    12·1 answer
  • Consumers decisions are primarily affected by preference and ________
    12·2 answers
  • Classify each statement about the Federal Reserve System as either true or false.
    14·1 answer
  • Cash Retained Earnings Service Revenue Utilities Expense Salaries Expense Accounts Receivable Accounts Payable Common Stock Equi
    14·1 answer
  • Washington Farms makes apple dumplings and apple pies using the same
    15·1 answer
  • Critically analyse howexternalnfactors affect entrepreneurship . Support your answer with contemporary examples
    13·1 answer
  • What is the future value of a 500 annuity payment over wight years if interest rates are 14 percent?
    9·1 answer
  • The additional utility a person receives from consuming an additional unit of a good or service is known as?
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!