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butalik [34]
3 years ago
11

1. Sorensen Systems Inc. is expected to pay a $2.00 dividend at year end (D1 = $2.00), the dividend is expected to grow at a con

stant rate of 5.0% a year, and the common stock currently sells for $50.00 a share. The before-tax cost of debt is 7.00%, and the tax rate is 45%. The target capital structure consists of 40% debt and 60% common equity. What is the company’s WACC if all the equity used is from retained earnings? (Answer: %)
Business
1 answer:
Alinara [238K]3 years ago
4 0

Answer:

6.94%

Explanation:

The computation of the company WACC is shown below:

= Weightage of debt × cost of debt × (1 - tax rate)  + (Weightage of  common stock) × (cost of common stock)

where,

Cost of common stock is

= Dividend ÷ Stock price + Growth rate

= $2 ÷ 50 + 5.0%

= 4% + 5%

= 9%

So, the company WACC is                                                                              

= (0.40 × 7%) × ( 1 - 45%) +  (0.60 × 9%)

= 1.54% + 5.4%

 = 6.94%

Hence, the company WACC is 6.94%

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GrogVix [38]

Answer: A. The relative cost index is given as = Current Price/Base Price x 100.

Explanation:

8 0
2 years ago
SMC had a 1/1/14 balance in the Allowance for Doubtful Accounts of $20,000. During 2014, it wrote off $14,400 of accounts and co
zhenek [66]

Answer:

b. $14,200

Explanation:

The computation of the bad debt expense is shown below:

= Balance in the Allowance for Doubtful Accounts - wrote off accounts + written off - estimated amount

= $20,000 - $14,400 + $4,200 - $24,000

= $14,200

The computation of the estimated amount is calculated below:

=  Ending balance of accounts receivable ×  uncollectible percentage

= $480,000 × 5%

= $24,000

8 0
3 years ago
ADC makes latex-free tubing for blood pressure instruments. This is Group of answer choices an output of ADC. an input into the
lord [1]

Answer:

C. Both an input and an output.

Explanation:

Latex-free tubing is basically an intermediate product for for blood pressure instruments. So this product is an output for ADC organization and it is also  an input for the production of blood pressure instruments in the company as well.  So, the option <u>"both an input and an output"</u> is the correct answer.

6 0
3 years ago
Balancing trade is important because if a nation imports more than it exports,
Gala2k [10]
I think its answer B because if they are sending more out then they are producing then it most likely going to decrease
5 0
3 years ago
A stock is selling at $40, a 3-month put at $50 is selling for $11, a 3-month call at $50 is selling for $1, and the risk-free r
aalyn [17]

Answer:

$0.745

Explanation:

GIven that

Current stock price  S_o = $40

strike price  X = $50

time to expiry of option = 3 - month

put price option P _o = $11

call price option C_o = $1

and the risk-free rate r = 6%

The amount that can be made on the arbitrage can be evaluated as a function of the Put-call parity.

i.e For parity ;

C_o + (X \times e^{-rt} ) = P_o + S_o

1 + (50 \times e^{-(0.06 \times 0.25} ) = 11 + 40

1 + (50 \times 0.9851 ) = 51

1 + (49.255 ) = 51

50.255 = 51

the difference in both values above illustrates that there is no  parity taking place and the arbitrage estimation here = 51 - 50.255 = $0.745

3 0
3 years ago
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