Answer:
WACC without debt is higher by = 1.7%
Explanation:
<em>The weighted Average cost of Capital (WACC) is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool..</em>
To determine the amount by which WACC would be higher, is the difference between WACC with and without debt.
WACC using debt
<em>Step 1</em>
Cost of debt = Before tax cost of debt × (1-T)
= 7%× (1-0.21) = 5.5%
Step 2
<em>Market value of debt and equity</em>
Market of debt = 200 million
Market value of equity = $55 × 10 = $550 million
Total market value = 550 + 200 = $750 million
Step 3
WACC with debt = ((5.5%× 200) + (12%.× 550))/ 750
= 10.3%
WACC without debt (i.e only equity)
WACC without debt = cost of equity = 12%
Difference in WACC between with and without debt
= 12%- 10.3%
= 1.7%
The WACC without debt is higher by 1.7%
<span> Revenue </span>accounts or <span>Expense </span><span>accounts</span>
Answer:
Correcting Entry
March 8 Dr. Cr.
Supplies $664
Equipment $600
Account Payable $64
Explanation:
Entry Should be
March 8 Dr. Cr.
Supplies $664
Account Payable $664
Entry Recorded
March 8 Dr. Cr.
Equipment $600
Account Payable $600
Firs error is amount recorded as $600 rather $664 and the second is account of equipment debited rather the account of Supplies Inventory.
Answer: This case is an example of <em><u>core competencies that further have turned into core rigidities.</u></em>
In this particular case , the store was capable of catering to the demands of the market. Thus providing excellent service and technical advice.
But with the dawn of an era, now the store is earning lower-than-average returns. Also this is to be pondered upon that in current era only few potential customers are able to appreciate the premium quality of the fabrics.
Answer and Explanation:
The journal entry would be
Cash Dr $15,000
Accumulated depreciation ($10,000 + $2,000) $12,000
Loss on disposal - Plant assets $2,000
To equipment $29,000
(Being the sale of the equipment is recorded)
here the cash, accumulated depreciation and loss would be debited as it increased the assets and losses while on the other hand the equipment is credited as it decreased the assets
