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]
4 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:
meriva4 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 disadvantage of home ownership includes which of the following?
jekas [21]
Less mobile because the house has to be sold in order to move to another location
8 0
4 years ago
Risk pooling is a strategy that attempts to use fewer warehouses to decrease the required safety stock levels since the negative
shepuryov [24]

Answer: (A) True

Explanation:

    Yes, the given statement is true that the risk pooling is one of the type of strategy which basically helps in explaining about the demand variability and also decrease the aggregate demand variance in the market.

 The main objective of the risk pooling is to maintain the inventory stock level and also avoiding the out of stock situation in the management.

By using the risk pooling strategy the various types of warehouse and companies are reduce the level of safety stock in the supply chain management and also transferring their risk to another organization such as insurance company.

 Therefore, the given statement is true.

6 0
3 years ago
Tyree's basketball coach makes his players practice free throws after a difficult practice and under the threat of having the wh
Zinaida [17]
<span>Tyree's coach is likely trying to instill teammate dependability in his players by making them run laps if their teammates do not get at least 75% of their free throwns in.</span>
3 0
4 years ago
According to expectancy theory, the three primary elements that determine how willing an employee is to work hard at tasks impor
ollegr [7]
The three primary elements are INSTRUMENTALITY, VALENCE AND EXPECTANCY.
The expectancy theory of motivation states that, an individual is will behave in a certain manner as a result of the way in which he has been conditioned to select a specific behavior over other forms of behavior. This implies that workers are usually motivated by the reward they get for the work they performed.<span />
4 0
3 years ago
Michael Burda of Humboldt University in Germany and Daniel Hamermesh of the University of Texas examined how workers in the Unit
Aleks04 [339]

GDP is the sum of all final goods and services produced by an economy in a given period. In calculating GDP only the final goods and services that are traded are accounted for. Thus, household services that do not generate income are not accounted for in GDP, only productive activities. Therefore, in the long run the tendency is that the GDP analyzed by this issue will decrease, because when the unemployment rate increases, fewer workers will be employed in the productive sector. These people may substitute work for leisure or household chores, but this will not count in GDP.

3 0
3 years ago
Other questions:
  • 3. A worker within the middle income class is preparing to retire. In the year before he retired, his gross monthly earnings are
    7·1 answer
  • The local Kennel Club is a not-for-profit organization with gross receipts of $23,500 for the current tax year. Under the Intern
    5·1 answer
  • CodeDesk Inc matches programmers with freelance jobs. It has 35 employees who staff its online chat room. It receives, on averag
    7·1 answer
  • Stone Culture Corporation was organized on January 1, 2017. For its first two years of operations, it reported the following:
    13·1 answer
  • Which of the following statements is true? a. The higher the discount rate, the higher the present value. b. The process of accu
    14·1 answer
  • Risers Inc. reported total assets of $3,200,000 and net income of $255,000 for the current year. Risers determined that inventor
    15·1 answer
  • When china's clothing industry expands, the increase in world supply lowers the world price of clothing. consider the effects th
    8·2 answers
  • Finerly Corporation sells cosmetics through a network of independent distributors. Finerly shipped cosmetics to its distributors
    13·1 answer
  • Volatility or Blank______ increases for equity holders when leverage increases. Multiple choice question. inevitability certaint
    8·1 answer
  • The aggregate quantity of goods and services demanded changes as the price level rises because.
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!