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nignag [31]
2 years ago
12

Suppose that TipsNToes, Inc.'s capital structure features 40 percent equity, 60 percent debt, and that its before-tax cost of de

bt is 9 percent, while its cost of equity is 15 percent. If the appropriate weighted average tax rate is 34 percent, what will be TipsNToes' WACC?
Business
1 answer:
Anit [1.1K]2 years ago
5 0

Answer:

9.564%

Explanation:

Given that,

Cost of Debt = 9%

Tax Rate = 34%

Weight of Debt = 60%

Cost of Equity = 15%

Weight of Equity = 40%

TipsNToes' WACC:

= [Cost of Debt × (1 - Tax Rate) × Weight of Debt] + [Cost of Equity × Weight of Equity ]

= [9 × (1 - 0.34) × 0.60] + (15 × 0.40)

= 9.564%

Therefore, the TipsNToes' WACC will be 9.564%

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Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018, the company's board of di
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Answer:

<u>December 31, 2018</u>

Debit : Dividend $40,000

Credit : Shareholders for dividends $40,000

Explanation:

When dividends are declared, we Debit an Equity Element - Dividend and Credit the Liability - Shareholders for dividends.

Calculation of this dividend is made on the stockholders in existence at the on a stated date (January 15 in this case) and at par value ($2) as follows :

Dividend = 100,000 x $2.00 x $0.20 = $40,000

6 0
3 years ago
Suppose the economy is operating in long-run equilibrium and a positive demand shock hits. We expect a short-run increase in rea
Pepsi [2]

Answer:

The correct answer is: an expansionary gap; decrease the money supply.

Explanation:

An expansionary gap is when genuine output surpasses potential output. At the end of the day, the economy is incidentally working over its long-run potential as estimated by real GDP.

3 0
3 years ago
A random sample of 16 students selected from the student body of a large university had an average age of 25 years and a standar
Alla [95]
Not significantly different from 24
3 0
3 years ago
This year, Mesa Inc.’s before-tax income was $11,252,000. It paid $529,000 income tax to Minnesota and $451,000 income tax to Il
Sever21 [200]

Answer:

Before-tax income                                                                   $ 11,252,000

Less: Deduction for state income tax(529000+451000)   $      980,000

Taxable Income                                                                   $   10,272,500

Tax rate                                                                                                        21%

Federal income tax                                                           $   2,157,225.00

Mesa’s combined tax rate

= ([$980,000 state tax + $2,157,225 federal tax] ÷ $11252000) 27.88%

Explanation:

6 0
3 years ago
A small producer of machine tools wants to move to a larger building and has identified two alternatives. Location A has annual
worty [1.4K]

Answer:

Locations Same Total Cost at output = 120

Location A superior (less TC) than Location B (more TC) at output = 100

Location B superior (less TC) than Location A (more TC) at output = 150

Explanation:

Total Fixed Cost = Total Fixed Cost + Total Variable Cost

Location A :

Total Cost A  = 800000 + 14000x

Location B :

Total Cost B = 920000 + 13000x

a. Two Locations have same Total Cost at output :

TC (A) = TC (B)

800000 + 14000x = 920000 + 13000x

920000 - 800000 = 14000x - 13000x

120000 = 1000x

x = 120000 / 1000 → = 120

b. Location A would be superior if : TC (A) < TC (B)

Hit & Trial method ; taking x = 100

[800000 + 14000 (100) = 220000] < [920000 + 13000 (100) = 2220000]

Location B would be superior if : TC (B) < TC (A)

Hit & Trial method ; taking x = 150

800000 + 14000 (150) = 2900000] > [920000 + 13000 (150) = 2870000]

5 0
3 years ago
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