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slega [8]
3 years ago
10

Cost of Preferred Stock Marme, Inc., has preferred stock selling for 96 percent of par that pays an 11 percent annual coupon. Wh

at would be Marme’s component cost of preferred stock?
Business
1 answer:
nataly862011 [7]3 years ago
7 0

Answer:

Component cost of preferred stock is 11.4583 %

Explanation:

Given Data:

Preferred stock selling=96 percent of par.

Annual Coupon =11 percent

Required:

What would be Marme’s component cost of preferred stock?

Solution:

The formula we are going to use is:

i_{stock}=\frac{D_o}{P_o}

Where:

D_o is  11 percent annual coupon

P_o preferred stock selling for 96 percent of par

If we convert the above percentage to dollar using the scale $1=1% then:

D_o=$11

P_o=$96

i_{stock}=\frac{\$11}{\$96}\\ i_{stock}=0.114583

Component cost of preferred stock is 11.4583 %

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3 years ago
Mercury Inc. purchased equipment in 2019 at a cost of $497,000. The equipment was expected to produce 580,000 units over the nex
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Answer:

1.

Gain or (Loss) on sale = (17000)  Loss

2.

Cash                                                     253600 Dr

Accumulated Depreciation               226400 Dr

Loss on Sale                                        17000 Dr

         Equipment                                         497000 Cr

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Gain or (Loss) on sale = 9400 Gain

4.

Cash                                                    280000 Dr

Accumulated Depreciation              226400 Dr

         Gain on Sale                                      9400 Cr

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We first need to calculate the carrying value of the equipment at the date of disposal. The carrying value is calculated as follows,

Carrying value = Cost  -  Accumulated depreciation

Depreciation 2019  =  (497000 - 33000) * 83000 / 580000

Depreciation 2019  = 66400

Depreciation 2020  =  (497000 - 33000) * 133000 / 580000

Depreciation 2020  = 106400

Depreciation 2021  =  (497000 - 33000) * 67000 / 580000

Depreciation 2021  = 53600

Carrying value = 497000  -  [ 66400 + 106400 + 53600 ]

Carrying value = $270600

1.

Gain or (Loss) on sale = Sales price  -  Carrying Value

Gain or (Loss) on sale = 253600  -  270600

Gain or (Loss) on sale = (17000)  Loss

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Cash                                                     253600 Dr

Accumulated Depreciation                226400 Dr

Loss on Sale                                        17000 Dr

         Equipment                                         497000 Cr

3.

Gain or (Loss) on sale = Sales price  -  Carrying Value

Gain or (Loss) on sale = 280000  -  270600

Gain or (Loss) on sale = 9400 Gain

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Cash                                                    280000 Dr

Accumulated Depreciation                226400 Dr

         Gain on Sale                                      9400 Cr

         Equipment                                         497000 Cr

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