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Malkin corp. has no debt but can borrow at 8.75 percent. the firm’s wacc is currently 16 percent, and there is no corporate tax.

Artyom0805 [142]

Answer:

a.

16%

b.

17.3%

c.

23.25%

d.

16%

Explanation:

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

As have the cost of capital, we need to calculate the cost of equity.

Cost of Capital = (Cost of Equity x Weightage of equity) + (Cost of Debt x Weightage of Debt)

a.

No Debt

16% = (Cost of Equity x 1 ) + (8.75% x 0)

16% = Cost of Equity + 0

Cost of Equity = 16%

b.

15% Debt and Equity is 85% (100%-15%)

16% = (Cost of Equity x 85% ) + (8.75% x 15%)

0.16 = (Cost of Equity x 0.85) + 0.013125

0.16 - 0.013125 = Cost of Equity x 0.85

0.146875 = Cost of Equity x 0.85

Cost of Equity = 0.146875 / 0.85 = 0.17279

Cost of Equity = 17.3%

c.

50% Debt and Equity is 50% (100%-50%)

16% = (Cost of Equity x 50% ) + (8.75% x 50%)

0.16 = (Cost of Equity x 0.50) + 0.04375

0.16 - 0.04375 = Cost of Equity x 0.50

0.11625 = Cost of Equity x 0.50

Cost of Equity = 0.11625 / 0.50 = 0.2325

Cost of Equity = 23.25%

d.

WACC for b and c are 16%

7 0

3 years ago

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Ethan is a young salesperson who has conversations with his customers in an attempt to establish and maintain good relationships

Alecsey [184]

In this scenario, Ethan<span> is engaging in a sales dialogue. Sales dialogue is a series of talks between the buyers and sellers. This would usually take place over time in order to build relationships. The purpose of this dialogue is to determine whether the prospect customer should b</span>e targeted. This dialogue would also help to clarity the prospect's situation. It would also help the seller to discover the prospect's needs and requirements in transacting the business. <span> </span>

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3 years ago

ABC Inc. has a dividend yield equal to 3 percent and is expected to grow at a 7 percent rate for the next seven years. What is A

denis-greek [22]

Answer:

option (A) 10 percent

Explanation:

Data provided in the question:

Dividend yield = 3 percent

Expected growth rate = 7 percent

Therefore,

The ABC's required return will be

= Dividend yield + Expected growth rate

or

The ABC's required return = 3% + 7%

or

The ABC's required return = 10%

Hence,

The ABC's required return is option (A) 10 percent

8 0

3 years ago

Tamarisk Corporation purchased a truck by issuing an $118,400, 4-year, zero-interest-bearing note to Equinox Inc. The market rat

lianna [129]

Answer:

Dr. Truck $80,869

CR. Note Payable $80,869

Explanation:

Note issued is a liability instrument. It is a promise of payment f principal amount and interest after a specific period of time. Zero interst interest bearing not does not offer any interest payment but it is issued at a discounted price . Present value of Note payable is the value that should be recognised as a cost of the truck.

Now calculate the present value of the Note.

PV of Zero coupon bond = FV / ( 1 + r )^n

Where

FV = FV maturity value of the note = $118,400

r = Interest rate = 10%

n= numbers of period = 4 years

Placing Values in the formula

PV of Zero coupon bond = $118,400 / ( 1 + 10% )^4

PV of Zero coupon bond = $80,869

5 0

3 years ago

Anderson Corporation has provided the following production and average cost data for two levels of monthly production volume. Th

nata0808 [166]

Answer:

Option (D) is correct.

Explanation:

Calculation of total manufacturing overhead:-

4000 units manufacturing overhead:

= Production volume × Manufacturing overhead

= 4,000 × $94

= $376,000

5000 units manufacturing overhead:

= Production volume × Manufacturing overhead

= 5,000 × $77.60

= $388,000

Variable cost per unit:

$=\frac{5000\ units\ manufacturing\ overhead-4000\ units\ manufacturing\ overhead}{1000}$

$=\frac{388,000-376,000}{1000}$

= 12

Fixed cost = Total cost - variable cost

= $388,000 - 5,000 × 12

= $388,000 - $60,000

= $328,000

So total monthly fixed manufacturing cost is $328,000.

7 0

3 years ago