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inn [45]
3 years ago
11

BC Corporation has 2.8 million shares of stock outstanding. The stock currently sells for $50 per share. The firm’s debt is publ

ically traded and was recently quoted at 95 percent of its face value. It has a total face value of $10 million, and it is currently priced to yield 12 percent. The risk-free rate is 5 percent, and the market risk premium is 7 percent. You’ve estimated that ABC has a beta of 1.25. If the corporate tax rate is 35 percent, what is the WACC of ABC Corporation?
Business
1 answer:
Evgesh-ka [11]3 years ago
4 0

Answer:

The WACC is 13.37%

Explanation:

The WACC or weighted average cost of capital is the cost of a firm's capital structure. The capital structure is made up of debt, preferred stock and common stock. In this question, there are only two components present in the capital structure i.e. debt and common stock.

The formula for WACC is,

WACC = wD * rD * (1 - tax rate)  +  wE * rE

Where,

  • w represents the weight of each component in the capital structure or value of each component as a proportion of total assets
  • r represents the cost of each component
  • we take after tax cost of debt. So we multiply cost of debt by (1 - tax rate)

We first need to determine the cost of equity using the CAPM,

rE = 0.05 + 1.25 * 0.07   =  0.1375 or 13.75%

We know that assets = debt + equity

Assets = (0.95 * 10)  +  (2.8 * 50)

Assets = 9.5  +  140  

Assets = 149.5 million

The WACC for ABC is:

WACC = 9.5/149.5  *  0.12  *  (1 - 0.35)  +  140/149.5  *  0.1375

WACC = 0.1337 or 13.37%

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Gordon Company reports the following information at the current fiscal year end of December 31: Common Stock, $0.10 par value pe
telo118 [61]

Answer:

$0.71

Explanation:

Calculation to determine What was the average selling price for the common stock issued

Using this formula

Common stock issued avarage selling price=

Paid-in Capital in Excess of Par-Common÷Common Stock par value per share

Let plug in the formula

Common stock issued avarage selling price=($600,000+$98,000)/($98,000÷$0.10)

Common stock issued avarage selling price=$698,000/$980,000

Common stock issued avarage selling price=$0.71

Therefore the average selling price for the common stock issued is $0.71

3 0
2 years ago
Which of the following is a characteristic of an unstructured interview? a. Conducted by a professional interviewer b. Focuses o
Gelneren [198K]

Unstructured Interviews are common in small businesses. Option C is correct.

<h2>What is an Unstructured Interview?</h2>
  • It refers to an interview in which the questions are not prearranged by the interviewer that is to be asked to the respondents.
  • Unstructured interviews are more casual and unrehearsed than structured interviews in which prearranged, standardized questions are asked.
  • This provides free-flowing conversation on respondents' personal qualities and knowledge related to relate to the work.

Since in small companies, the work areas of employees are wider than the big corporate.

Therefore, unstructured Interviews are commonly used in small businesses to get a deeper understanding of respondents' personal qualities related to work.

To know more about Unstructured:

Interview:brainly.com/question/12208322

5 0
2 years ago
Which of the following statements is FALSE regarding financial and nonfinancial measures of performance?a.Nonfinancial measures
faltersainse [42]

Answer:

D. Financial measures are lead indicators of future success.

Explanation:

This is said to be not true regarding financial and non financial measures of performance.

Businesswise, it is often debated whether a commonly perceived good company, as defined by characteristics such as competitive advantage, stable earnings, above-average management, and market leadership, is also a good company in which to invest. While these characteristics of a good company can point toward a good investment, this article will explain how to also evaluate the company's financial characteristics and how to know if a company is a good investment.

8 0
3 years ago
Using the data set below, what would be the forecast for period 5 using a four period weighted moving average? The weights for e
swat32

Answer:

13,710

Explanation:

The computation of the forecast for period 5 using a four period weighted moving average is shown below:

= Weights of period 1 × Period 1 + Weights of period 2 × Period 2 + Weight of period 3 × Period 3 + Weights of period 4 × Period 4

= .05 × 10000 + .15 × 12400 + .30 × 13250 + .50 × 14750

= 5,00 + 1,860 + 3,975 + 7,375

= 13,710

4 0
3 years ago
Suppose that labor is the only variable input to the production process. If the marginal cost of production is diminishing as mo
attashe74 [19]

Answer:

Marginal product will increase.

Explanation:

Since the labor is only variable input and the marginal cost of production is diminishing that means the cost of producing additional unit is lower. So marginal product of labor will be increasing.

Moreover, MC = w /MPL

Thus, diminishing marginal cost will exhibit increasing marginal product of labor.

8 0
3 years ago
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