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
viktelen [127]
2 years ago
11

Accessory Industries has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 100

thousand bonds. If the common shares are selling for $22 per share, the preferred shares are selling for $10.50 per share, and the bonds are selling for 96 percent of par ($1,000), what would be the weights used in the calculation of Accessory's WACC for common stock, preferred stock, and bonds, respectively
Business
2 answers:
Whitepunk [10]2 years ago
7 0

Answer:

Common Stock = 29.2%

Preferred Stock = 7%

Bonds = 63.8%

Explanation:

Weights used in the WACC are based on the market value of the each capital option. Market value can be calculated by multiplying the numbers of shares or bonds with respective market value of each. Dividing these market values by the total capital will result in the weight of each capital.

Market Value

Common stock = Numbers of common stock shares x market value of each share = 2,000,000 x $22 = $44,000,000

Preferred stock = Numbers of common stock shares x market value of each share =1,000,000 x $10.5 = $10,500,000

Bond = Numbers of Bonds x market value of Bond =100,000 x ( $1,000 x 96% ) = $96,000,000

Weights = Market value  / Total Capital

Total Capital = $44,000,000 + $10,500,000 + $96,000,000 = $150,500,000

Common Stock = $44,000,000 / $150,500,000 = 0.292 = 29.2%

Preferred Stock = $10,500,000 / $150,500,000 = 0.07 = 7%

Bonds = $96,000,000 / $150,500,000 = 0.638 = 63.8%

Natalija [7]2 years ago
4 0

Answer:

Equity is 0.29

Debt is 0.64

Preferred stock 0.07

Explanation:

WACC=Ke*E/V+Kd*D/V*(1-t)*Kp*P/V

However, the requirements of the question is weights of the bonds,equity and preferred stock which are E/V,D/V and P/V respectively

E is the value of equity=2,000,000*$22=$44,000,000

D is the value of debt =100,000*$1000*96%=$96,000,000

P is the value of prefered stock=1,000,000*$10.50=$10,500,000

Total firm's finance(V)                                                   $150,500,000

E/V=$44,000,0000/$150,500,000=0.29

D/V=$96,000,0000/$150,500,000=0.64

p/v=$10,500,000/$150,500,000=0.07

You might be interested in
The extent to which a firm's internal activities encompass one, some, many, or all of the activities that make up an industry's
Free_Kalibri [48]
The answer is:  [A]:  "vertical scope" .
_____________________________________________
8 0
3 years ago
The Hoover Dam backs up the Colorado River and creates Lake Mead, which is approximately 115 miles long and has a surface area o
kvv77 [185]

Answer:

0.403ft/day

Explanation:

Area = 250 miles = 250 × 5280^2= 6.9696e9 ft

Rise per sec = (Flow in - Flow out)/Area of lake = (40,000 - 7,500)/(6.9696e9) = 4.663e-6ft/s

Therefore in 24 hours = 4.663e-6 × 3600 × 24 = 0.403ft/day

4 0
2 years ago
An agreement exists when one party offers a certain bargain to another party.
Fynjy0 [20]

Answer:

the answer of the question is true

3 0
2 years ago
A situation in which some resources are NOT fully utilized is represented in a
svp [43]
The production would be a my a point inside the curve. The curve shows the possibility of producing with all possible materials so inside the curve is representative of one or more of the resources not being used to its full capacity.
6 0
2 years ago
Sinking fund bonds: A. Are bearer bonds. B. Are registered bonds. C. Require equal payments of both principal and interest over
monitta

Answer:

The answer is D.

Explanation:

Sinking funds require the issuer(borrower) to set aside assets at specified amounts to retire the bonds at maturity. Sinking fund helps the issuer to secure a bond with lower yield.

An agreed amount is deposited at an agreed period (e.g yearly) so as to pay of the par value or principal value at maturity.

6 0
3 years ago
Other questions:
  • Holly Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400. The tax rat
    6·1 answer
  • A corporation has issued 50,000,000 shares of common stock at $.50 par. The corporation has 10,000,000 shares of Treasury Stock
    8·1 answer
  • Ivan Knobel holds a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. He is in the process of
    12·1 answer
  • Cambridge Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the
    14·1 answer
  • Explain three types of production technology defined by James D. Thomson and discuss what kind of structure (Mechanic Vs. Organi
    15·1 answer
  • Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion ma
    13·1 answer
  • When offered paid medical insurance——-consider benefit?
    14·2 answers
  • On December 30, 2014, Yang Corporation granted compensatory stock options for 5,000 shares of its $1 par value common stock to c
    11·1 answer
  • Grade 10 SBA TERM 3 business studies ​
    11·1 answer
  • When making keep or replace decisions, management should consider the: (Check all that apply.)
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!