1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Arada [10]
3 years ago
13

MicroTech Corporation maintains a capital structure of 40 percent debt and 60 percent common equity. To finance its capital budg

et for next year, the firm will sell 11% coupon bonds at par value (assume no flotation costs). The firm will finance the rest of its capital expenditures with retained earnings. MicroTech expects next year's dividend to be $1.30 per share. Dividends are expected to grow at 7% per year for the foreseeable future. The current market value of MicroTech's common stock is $30 per share. If the firm has a corporate tax rate of 21%, what is its weighted cost of capital for next year?
Business
1 answer:
timama [110]3 years ago
5 0

Answer:

weighted cost of capital for next year is 10.27 %.

Explanation:

Weighted cost of capital = Ke × (E/V) + Kd × (D/V)

Ke = Cost of Equity

    = Dividend Yield + Expected growth rate

    = $1.30 / $30.00 + 0.07

    = 0.11333 or 11.33 %

Kd = Cost of Debt

     = Interest × (1 - tax rate)

     = 11% × ( 1 - 0.21)

     = 8.69 %

Weighted cost of capital =  11.33 % × 60% + 8.69 % × 40%

                                         = 10.27 %

You might be interested in
What are some arguments in favor of raising the minimum wage? On the other hand, what are some arguments against raising the min
Ede4ka [16]

Answer:

Explanation:

The main argument in favor regarding increasing minimum wage is that a higher wage will result into an increase in the standard of living of the people. Furthermore, a rise in the minimum wage can help in lifting people out I poverty. Due to higher wages and salaries, workers will have more money to cater for their families and meet their needs. Lastly, an increase in the minimum wage means that the government can reduce its expenditures on helping the low income earners and can therefore invest the money in other critical sectors of the economy.

The arguments against raising the minimum wage is that it can lead to inflation. Inflation in the rise in the price for goods and services. When there's an increase in minimum wage, sellers may increase the price of goods as there'll be more money to spend by households. Also, it can lead to losses of jobs as employersay have to cut down cost on order to be able to increase the wages of some workers and thereby may result in some workers being laid off.

Minimum wages lead to the reduction in the entry-level jobs that are available, and reduces the change of entry level graduates to get training, and lifetime income. According to Economists, minimum wages will result into decrease in the employment opportunities that are available for the youths and thereby create unemployment. Potential employees will miss out on the training that should have been done at the initial stage one is entering an organization.

3 0
3 years ago
Trell Corporation transferred $50,000 of accounts receivable to a local bank. The transfer was made without recourse. The local
PIT_PIT [208]

Answer:

Correct one is Option D.

<u>$6,500</u>

Explanation:

Fair value of its 20% interest in the receivables 8000  

Less: Factoring fee=50000*3% =1500

Amount receivable from factor= 8000-1500=6500  

7 0
3 years ago
Muy Bueno Bakery Company sells three different products. Currently they are not able to meet all of their customers' demand. Usi
cestrela7 [59]

Answer:

c. Pie

Explanation:

In order to determine which product is the most profitable, we must calculate the contribution margin per hour:

                                              Cake               Pie                      Cookies

contribution margin               $18                 $11                          $3

production time                        3                    1                           .30

contribution margin p/hour    $6                 $11                         $10

Pie is the most profitable product, followed by cookies, and cakes are the less profitable products.

4 0
3 years ago
Which education level has the highest return on investment (ROI)? ABachelor's Degree (4 years of college) BROI is equal for all
Bad White [126]
<span>A. A Bachelor's Degree This has the highest rate of investment because with the other options like a high school diploma, the person who gets such certificate can only earn minimum wage. However, with a 4 years Bachelor's degree the person can earn more and will live according to certain societal standards.</span>
8 0
4 years ago
What happens to each company's net income if sales increase by 20%?
Tju [1.3M]
The company's net income will grow higher if it increases by 20% and then it will just keep getting higher and higher. Hope this helped, have a great day! :D
8 0
3 years ago
Other questions:
  • On January 1 of the current year, Barton Corporation issued 10% bonds with a face value of $200,000. The bonds are sold for $191
    11·1 answer
  • The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchang
    8·1 answer
  • A production possibilities curve represents
    11·1 answer
  • Truman applies for a job at Skylight Canopy Corporation for which he is well qualified, but for which he is rejected. Skylight c
    15·1 answer
  • Sandhill Company issued $2,400,000 of 10%, 10-year bonds on January 1, 2017, at 103. Interest is payable semiannually on July 1
    12·1 answer
  • Assume France and Mali can both produce grain and dates, and that the only limited resource is the farming labor force, meaning
    5·1 answer
  • Book store owner, Sandra Walker, has a personal check from one of her customers, payable to The Book Nook. Sandra wants to depos
    6·1 answer
  • Multiple Choice Question 38 Vaughn, Inc. has 1000 shares of 5%, $10 par value, cumulative preferred stock and 63000 shares of $1
    7·1 answer
  • Oligopolistic firms have been called what as this lesson has mentioned
    9·1 answer
  • Companies that try to act in a socially responsible way are likely to focus on such activities as Multiple select question. incr
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!