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Delicious77 [7]
3 years ago
10

Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity

on the company's outstanding bonds is 10%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 14.50%. What is Pearson's cost of common equity
Business
1 answer:
gizmo_the_mogwai [7]3 years ago
5 0

Answer:

21.45%

Explanation:

Pearson motors has a target capital structure of 45% debt and 55% common equity

The yield to maturity is 10%

Tax rate is 40%

WACC is 14.50%

First of all we have to find the tax cost of debt

Tax cost of debt= Yield to maturity×(1-tax rate)

= 8×(1-25/100)

= 8×(1-0.25)

= 8×0.75

= 6%

The next step is to calculate the common equity

Therefore, the common equity can be calculated as follows

WACC= Respective cost×Respective weight

14.50= (6×0.45)+(0.55×common equity)

14.50= 2.7+(0.55×common equity)

14.50-2.7= (0.55×common equity)

11.8= (0.55×common equity)

Common equity= 11.8/0.55

Common equity= 21.45%

Hence Pearson's cost of common equity is 21.45%

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mario62 [17]

Answer: False

Explanation:

Ethics are the moral principles which govern the behavior of a person. Ethics help us to know what is right or what is wrong.

Ethics Training program are done in order to enable workers to be able to identify and also deal with the ethical problems that they may face.

Therefore, the statement that "Ethics training programs typically teach how to disguise unethical behavior and not how to avoid unethical behavior" is false.

6 0
3 years ago
The Gap has recently produced a new line of athletic wear that closely competes with a designer label in its quality, utility, a
Bingel [31]

Answer:

<em>Behavioristic </em>

Explanation:

Behavioral segmentation <em>distinguishes a population based on its actions, the reaction, use or understanding of a product by the community. </em>

Consumer habits is a topic of advertising strategy that has been studied extensively over time.

This is primarily because a customer takes into account many considerations before making a decision.

8 0
3 years ago
A year ago, Jasper Inc. sold 20-year bonds at par with a coupon rate of 4.5 percent and semiannual payments. The face value of e
scoray [572]

Answer:

= $877.32

Explanation:

<em>The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).</em>

<em>Value of Bond = PV of interest + PV of RV</em>

The value of bond for Jasper Inc can be worked out as follows:

Step 1

<em>PV of interest payments</em>

<em>Semi annul interest paymen</em>t

= 4.5% × 1000 × 1/2

= 22.5

<em>Semi-annual yield</em> = 5.6/2 = 2.8% per six months

<em>Total period to maturity (in months)</em>

= (2 × 19) = 38 periods  <em> (Note it was sold a year ago)</em>

<em>PV of interest = </em>

<em> </em>22.5 × (1- (1+0.028)^(-38)/0.028)

= 22.5 ×23.20871226

= 522.196

Step 2

<em>PV of Redemption Value</em>

= 1,000 × (1.056)^(-19)

= 355.128

<em>Price of bond</em>

=  522.19 + 355.12

= $877.32

<em />

                               

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3 years ago
Broker Barb takes out a two-page color full-page ad in the weekend paper of her listed properties. What form of advertisement is
romanna [79]

It is the form of product advertisement.

<h3>What is a product advertisement?</h3>
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  • Direct mail, comparative, cooperative, informational, and outdoor advertising are some kinds of product advertising.
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  • Broker Barb advertises her listed homes in the weekend paper with a two-page color full-page ad, which is also a type of product advertising.

Therefore, in the given situation it is the form of product advertisement.

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ra1l [238]

Roosevelt's "big stick" foreign policy meant that the United States would engage in diplomatic negotiations while retaining the ability to use force if necessary.

<h3>What are some examples of Roosevelt's big stick strategy?</h3>

Numerous instances in foreign affairs, President Roosevelt employed big stick policy. He negotiated a peace deal between Russia and Japan, expanded American influence in Cuba and more.

<h3>How did America benefit from the "big stick" policy?</h3>

Roosevelt was successful in keeping the United States out of wars by threatening legitimately with force under his "big stick" strategy.

<h3>How was the "big stick" approach applied in Panama?</h3>

Roosevelt used the "big stick" to put down the Colombian uprising by aiding the Panamanian people. He dispatched American battleships to the Colombian coast in November 1903 to prevent it from putting down the revolt in Panama.

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