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3 years ago

Feldspar Inc. is considering the capital structure for a new division. Management has been given the following cost information:

Business

1 answer:

34kurt3 years ago

8 0

Answer:

Option 4

Explanation:

In this question ,we have to compute the WACC which is shown below:

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

For Option 1, it would be

= (0.3 × 10%) × ( 1 - 40%) + (0.7 × 12.5%)

= 1.8% + 8.75%

= 10.55%

For Option 2, it would be

= (0.4 × 10.5%) × ( 1 - 40%) + (0.6 × 13%)

= 2.52% + 7.8%

= 10.32%

For Option 3, it would be

= (0.5 × 11%) × ( 1 - 40%) + (0.5 × 13.5%)

= 3.3% + 6.75%

= 10.05%

For Option 4, it would be

= (0.6 × 11.7%) × ( 1 - 40%) + (0.4 × 14.2%)

= 4.212% + 5.68%

= 9.89%

For Option 5, it would be

= (0.7 × 13%) × ( 1 - 40%) + (0.3 × 15.5%)

= 5.46% + 4.65%

= 10.11%

So based on this, the management should accept option 4 as it derives the best debt asset ratio

The weightage of equity would be come

= 1 - weightage of debt

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The following information is available for Lock-Tite Company, which produces special-order security products and uses a job orde

FromTheMoon [43]

Answer:

Lock-Tite Company

1. Cost of direct materials used = $186,000

2. Cost of direct labor used = $265,000

3. Cost of goods manufactured = $ 625,400

4. Cost of goods sold = $652,800

4. Gross profit = $747,200

5. Underapplied overhead = $29,500

Explanation:

a) Data and Calculations:

Inventories April 30 May 31

Raw materials $43,000 $52,000

Work in process 10,200 21,300

Finished goods 63,000 35,600

Raw materials

Account Titles Debit Credit

Beginning balance $43,000

Cash 210,000

Factory overhead $15,000

Goods in Process 186,000

Ending balance $52,000

Goods in process

Account Titles Debit Credit

Beginning balance 10,200

Raw materials 186,000

Factory payroll 265,000

Factory overhead 185,500

Finished Goods Inventory 625,400

Ending balance 21,300

Factory Payroll

Account Titles Debit Credit

Cash $345,000

Factory Overhead $80,000

Goods in Process 265,000

Finished goods

Account Titles Debit Credit

Beginning balance 63,000

Goods in Process 625,400

Cost of goods sold 652,800

Ending balance 35,600

Factory Overhead

Account Titles Debit Credit

Raw materials $15,000

Factory payroll 80,000

Cash 120,000

Goods in Process $185,500

Balance 29,500

Income Statement (Partial)

Sales $1,400,000

Cost of goods sold 652,800

Gross profit $747,200

4 0

3 years ago

What type of business sells to the end consumer

Shtirlitz [24]

Answer:

business-to- consumer (B2C)

Explanation:

Commerce is a business model which typically involves the buying and selling of goods or products at a given price.

Generally, commerce comprises of four (4) business models and these are;

1. Business to Business (B2B).

2. Consumer to Consumer (C2C).

3. Business to Government (B2G).

4. Business to Consumer (B2C).

A Business to Consumer (B2C) can be defined as a market which typically involves businesses selling their goods and services directly to the end consumers for their personal use.

Hence, the type of business that sells to the end consumer is known as business-to- consumer (B2C).

Some examples of companies that engage in the Business to Consumer (B2C) business model are; Amazon, Goo-gle, Walmart, Alibaba, Uber, LinkedIn, etc.

4 0

3 years ago

Any time you walk into a store, you are in a market setting.

lesya [120]

Answer:true

Explanation:because there are still a store is what it is referring to bud

5 0

3 years ago

Read 2 more answers

Toy Town is considering a new toy that will cost $49,100 in startup costs. The toy is expected to produce cash flows of $47,500

Tasya [4]

Answer:

NPV with a 14.9% discount rate: 6,329.06

The toy should be produced as the NPV is positive.

IRR = 26.65%

Explanation:

First we calculate for the NPV using the given discount rate of 14.9%

We will calculate the present value of each year cash inflow:

$\frac{inflow}{(1 + rate)^{time} } = PV$

Year 1 cash inflow: 47,500.00

time 1.00

rate 0.149

$\frac{47500}{(1 + 0.149)^{1} } = PV$

PV 41,340.30

Year 2 cash inflow: 18,600.00

time 2.00

rate 0.149

$\frac{18600}{(1 + 0.149)^{2} } = PV$

PV 14,088.76

Then, we add them and subtract the investment to get NPV

NPV = 14,088.76 + 41,340.3 - 49,100 = 6,329.06

The toy should be produced as the NPV is positive.

Now for the IRR

That is the rate at which NPV equals zero we can solve for this using the quadratic equation as there are only two cash flow:

Year 1 will discount at (1+IRR)

Year 2 will be discount at (1+IRR )^2

So we can express and recreate the quadratic formula:

18,600 X^2 + 47,500 X - 49,500 = 0

A = 18,600

B = 47,500

C = -49,100

$x_1 = \frac{-b+\sqrt{b^{2} -4ac}}{2a}\\x_2 = \frac{-b -\sqrt{b^{2} -4ac}}{2a}$

We can solve and get:

x1 = 0.78957

x2 = -3.3433

We take the positive value.

and now solve for IRR

$\frac{1}{1+ IRR} = 0.78957\\IRR = \frac{1}{0.78957} -1$

IRR = 0,2665121 = 26.65%

This will be the IRR for the project.

4 0

4 years ago

Handy Home sells windows and doors in the ratio of 7:3 (windows:doors). The selling price of each window is $111 and of each doo

Setler [38]

Answer:

Selling Price $156

Variable cost $101.25

Break-even 9,500 units and $1,482,000

Explanation:

Compposit unit unit is a unit made according to the propostion to sale. Different products are combined to make a sales mix for composit unit.

Selling price per composit unit = [ ( 7 x 111 ) + ( 3 x 261 ) ] / 10 = 1560 / 10 = $156

Variable cost per composit unit = [ ( 7 x 68 ) + ( 3 x 180.5 ) ] / 10 = 1,017.5 / 10 = $101.75

Contribution per composit unit = Selling Price - variable cost = $156 - 101.75 = $54.25

Break-even Point = Total Fixed cost / Contribution per unit = $515,375 / 54.25 = 9,500 units

Break-even Point ($ value )= 9,500 x 156 = $1,482,000

8 0

3 years ago