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Vitek1552 [10]
4 years ago
9

Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) T

he firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,000.00. (2) The company's tax rate is 25%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20. (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock. What is its WACC? Do not round your intermediate calculations.
Business
1 answer:
inn [45]4 years ago
8 0

Answer:

9.315%

Explanation:

The computation of WACC is shown below:-

But before that we need to do the following calculations

PV -$1,000

PMT 80

N 20

FV $1,000

Compute IY 8%

After tax cost of Debt = Before tax cost of debt × (1 - tax rate)

= 8% × (1 - 25%)

= 6%

According to the CAPM,

Cost of Equity =Risk free Rate + (Beta × Market Risk Premium)

= 4.5% + (1.2 × 5.5%)

= 11.10%

Weight of Equity = 100% - 35%

= 65%

WACC = (Weight of Equity × Cost of Equity) + (Weight of debt × Cost of debt)

= (65% × 11.10) + (35% × 6)

= 9.315%

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From the complete information, Vietnam has low points in the avoidance index. This implies that they're less associated with their cultural roots and don't have concern for hiring white people.

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4 0
2 years ago
Brazil is one of the world’s lowest-cost producers of ethanol and soybeans. Japanese corporations have heavily invested in Bra
guapka [62]

Answer: The Japanese companies invest in Brazil in order to cut cost.

Explanation:

Since Brazil is one of the world's lowest-cost producers of ethanol and soybeans. Japanese corporations investing heavily in Brazil to lease large tracts of land to grow soybeans for export to Japan, are doing this in order to minimize their cost.

Growing soyabeans in Brazil is cheaper since there's a lower cost of producing it when compared to the higher cost of producing it in Japan. This in turn, helps the Japanese companies reduce their cost as the cost of factor Input is reduced and also the Japanese companies can make more profit.

8 0
3 years ago
Points $A$, $B$, $C$, and $D$ are located on a line. $A$ is at $(-6,13)$, $D$ is at $(2, 14)$, $C$ is the midpoint of $\overline
dedylja [7]

Answer:

9.25

Explanation:

∵ The coordinates of midpoint of a line segment having end points (x_1,y_1) and (x_2,y_2) are,

(\frac{x_1+x_2}{2},\frac{y_1+y_2}{2})

Given,

The coordinates of A are (-6, 13),

Coordinates of D are (2, 14),

If C is the midpoint of line segment AD,

Then the coordinates of C are,

(\frac{-6+2}{2}, \frac{13+14}{2})

=(\frac{-4}{2},\frac{27}{2})

=(-2, 13.5)

Now, if B is the mid point of line segment AC,

Then the coordinates of B are,

(\frac{-6-2}{2},\frac{13+13.5}{2})

=(\frac{-8}{2}, \frac{26.5}{2})

=(-4, 13.25)

Hence, the sum of the coordinates of B = -4 + 13.25 = 9.25

4 0
3 years ago
A disgruntled employee of your major competitor mails top-secret information or new product samples to you. Do you begin to do a
EleoNora [17]

Question:

A disgruntled employee of your major competitor mails top?secret information or new product samples to you. Do you begin to do a dance on your desktop or do you immediately mail the information back to your competitor? What would you do?

a.  Throw the plans or secrets away.

b.  Send them to your research department for analysis.

c.  Notify your competitor about what is going on.

d.  Call the FBI.

Answer:

You are to Call the FBI

Explanation:

In this case, where a disgruntled employee of your major competitor mails top-secret information or new product samples to you, the right decision to make acclrding to your company's code and ethics is to contact the security agencies, which in this case is the Federal Bureau of Investigation (FBI). The Federal Bureau of Investigation would make proper investigations and take proper steps to protect your company so they(your company) won't be accused of stealing information from a competitor in time to come.

This is the best way, both ethically and legally to handle this situation.

4 0
3 years ago
Your promotional budget for this year is $200 for personal selling, $400 for sales promotion, $1000 for advertising, and $700 fo
9966 [12]
Your total promotion budget would be 2300 i guess
5 0
4 years ago
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