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user100 [1]
3 years ago
6

Myers Corporation's stock currently trades at $40 a share. Investors estimate that the year-end dividend will be $2.00 a share a

nd that its dividend will grow at 5% a year (i.e., D1= $2.00 and g = 5%). The company needs to issue new stock in order to fund its upcoming projects, and investment bankers estimate that the floatation cost will be 4%. What is Myers' cost of new external equity?
a) 10.2%
b) 12.0%
c) 9.6%
d) 11.3%
e) 8.5%
Business
1 answer:
Fofino [41]3 years ago
4 0

Answer: 10.2%

Explanation:

The formula to solve this question will be: Re =D1/P0(1 - float) + g

where,

D1 = $2.00

P0 = $40

Float = 4% = 4/100 = 0.04

g = 5% = 5/100 = 0.05

We will then solve Myers' cost of new external equity by slotting the values into the formula written. This will now be:

Re =D1/P0(1 - float) + g

= 2/40(1 - 0.04) + 0.05

= 2/(40 × 0.96) + 0.05

= 2/38.4 + 0.05

= 0.052 + 0.05

= 0.1020

= 10.2%

Myers' cost of new external equity will be 10.2%

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8 0
3 years ago
When Glenn is thirsty, he always buys a Coke. Like many consumers, Glenn engages in considerable alternative evaluation when buy
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Answer:

False

Explanation:

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3 0
3 years ago
During june, vixen company sells $850,000 in merchandise that has a one year warranty. experience shows that warranty expenses a
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Answer:

Explanation:

The journal entry is shown below:

Warranty expense A/c Dr $25,500

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(Being the estimated warranty provision is recorded)

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4 0
3 years ago
Zanda Corp. and Jones Corp. are identical in every way (products produced, costs, demand, etc.) except for one. Zanda uses a lev
Natali [406]

Answer: (C) Zanda will have higher inventory carrying costs.

Explanation:

  The inventory carrying cost is one of the type of overall holding inventory cost that helps in identifying the various types of business expenses and also storing the various types of unsold goods and the services in the market.  

The inventory carrying cost is also known as the holding cost and it is basically responsible for handling the cost system by using the estimated formula.

According to the given question, Zanda corporation is basically using the level production plan for the purpose identifying their business factors such as costs, demand and the products.

So, based on the given information is Zanda will have the high inventory carrying cost statement is true. Therefore, Option (C) is correct answer.  

 

3 0
3 years ago
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Answer:

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Explanation:

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Ending Finished Goods Inventory$18,000

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COGS= 19,500 + 126,800 - 18,000= $128,300

6 0
3 years ago
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