All categories

3 years ago

You are given the following information for Lightning Power Co. Assume the company's tax rate is 35 percent.

Business

1 answer:

olga55 [171]3 years ago

5 0

Answer:

The company's WACC is 9.14%

Explanation:

cost of preferred stock

= (dividend on preferred stock)/(current market price)

= [$100*4%]/$72

= 5.56%

total finance = debt + equity + preferred stock

= (8,000*$1,060) + (310,000*$57) + (15,000*$72)

= $8,480,000 + $17,670,000 + $1,080,000

= $27,230,000

weight of debt = debt/total finance

= $8,480,000/$27,230,000

= 0.31

weight on equity = equity/total finace

= $1.080.000/$27,230,000

= 0.04

WACC

= (weight of debt*after tax cost of debt) + (weight on equity*cost of equity)

= (0.31*0.0393) + (0.65-0.1185) + (0.04*0.0556)

= 9.14%

Therefore, The company's WACC is 9.14%

You might be interested in

Retain the small predictable layers of risk and transfer the unpredictable catastrophic layer of risk. Does this statement promo

ELEN [110]

Answer:

Yes the statement does

Explanation:

Retaining small predictable layers of risk and transferring the unpredictable catastrophic layer of risk to a more capable body is a very good approach towards promoting appropriate risk financing decision making, this is because

Financial risk decisions are decisions taken between alternatives i.e risks associated with business activities . it is more appropriate to take alternatives with a predictable layer of risk,that way it would be easier for the management to handle the risk associated with it, while transferring the unpredictable catastrophic layer of risk to a more capable body ,like the Insurance companies .

7 0

3 years ago

JL.53 Bob's Bumpers has a repetitive manufacturing facility in Kentucky that makes automobile bumpers and other auto body parts.

Strike441 [17]

Answer:

Annual demand = 75000 = D

S = ordering cost/set up cost = $53

d = daily demand = 75000/250 = 300

h = holding cost per unit per year = $25

p = Daily production rate = 320

optimal size of the production run =EPQ = sqrt((2*D*S)/(h*(1-(d/p))))

= sqrt((2*75000*53)/(25*(1-(300/320))))

= 2255.659549 = 2255.66 (Rounded to 2 decimal places)

maximum inventory = EPQ*(1 - (d/p))

= 2255.66*(1 - (300/320))

= 140.97875

Avergae inventory = 140.97875/2 = 70.49

Number of production runs = Annual demand/EPQ = 75000/2255.66 = 33.25

Holding cost with EPQ = 2255.66 = 70.49*25 = 1762.25

With EPQ = 500, maximum inventory = 500*(1 - (300/320)) = 31.25

Holding cost with EPQ = 500, holding cost (31.25/2)*25 = 390.625

Savings = 1762.25 - 390.625 = 1371.625

6 0

3 years ago

On January 1, Skysong, Inc. had 90,500 shares of no-par common stock issued and outstanding. The stock has a stated value of $5

timama [110]

Answer:

No. of shares outstanding = A

Par Value (at $5) = B

Additional Paid in capital in excess of Par = C

Dividend = D

A B(A*$5) C D

Jan 1 balance 90,500 $452,500 $0

Add: Issued Apr 1 21,000 $105,000 $294000

June 30 Balance 111,500 $557,500 $294,000 $111,500

shares [111,500 shares x $1]

Add: Dec 1 Issued 2,500 shares $12,500 $32,500

Dec 31 Balance 114,000 $570,000 $326,500 $490,200

[114,000 shares x $4.3]

Journal Entries based on above

Date Accounts Titles Debit Credit

15-Jun Dividends $111,500

Dividends payable $111,500

10-Jun Cash $111,500

Dividends $111,500

15-Dec Dividends $490,200

Dividends payable $490,200

6 0

3 years ago

Bond issuance: 20% of total funds, requires 15% interest per year Bank loan: 60% of total funds, requires 9.5% interest per year

Anettt [7]

Answer: 28.57%

Explanation:

Average return given the variables will be;

$Average rate of return = \frac{Annual net income}{Average investment}$

Average rate of return = $\frac{1,000,000}{\frac{7,000,000}{2} }$

Average rate of return = 1,000,000/3,500,000

Average rate of return = 28.57%

4 0

3 years ago

Based on the following information, prepare the bank reconciliation for Cougar Corp. as of December 31. A. On December 31, Couga

True [87]

Answer and Explanation:

The Preparation of bank reconciliation for Cougar Corp. as of December 31 is shown below:-

Cougar Corp.

Bank reconciliation

For the year ended December 31

Particulars Amount

Bank balance Dec 31 $24,575

Add: Deposit in transit $2,500

Less:

Outstanding checks #302 ($180)

Outstanding checks #303 ($95)

Outstanding checks #304 ($25) ($300)

Bank balance adjusted $26,775

Cash balance on 31 Dec $26,504

Add: EFT from customer $1,700

Add: Interest income $21 $1,721

Less: Posting error

($5,400 - $4,500) $900

Less: NSF check $500 $1,400

Book balance adjusted $26,775

Hence, the bank balance and the book balance are matched

8 0

3 years ago