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Semenov [28]
3 years ago
14

Let's say Capital Theatre has the cost of debt of 10%, the cost of equity of 18%, and the debt ratio of 45% (i.e., the firm fina

nces 45% of the market value of its assets with debt). If the tax rate is 21%, what is the weighted average cost of the firm
Business
1 answer:
Papessa [141]3 years ago
8 0

Answer:

The weighted average cost of the firm is 13.46%

Explanation:

To calculate the weighted average cost of the firm we have to use the following formula

WACC = After tax Cost of Debt*Weight of Debt + Cost of Equity*Weight of Equity . We have all the details so we can proceed with the formula

 WACC = 10%*(1-21%)*45% + 18%*55%

              = 13.455%

               =13.46%. Weighted average cost of the firm

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Halliford Corporation expects to have earnings this coming year of per share. Halliford plans to retain all of its earnings for
STatiana [176]

Answer:

P₀ = $59.45

Explanation:

the numbers are missing so I looked for a similar question:

  • expected EPS = $2.775
  • retain 0% of earnings (years 1 - 2)
  • retain 48% of earnings (years 3 - 4)
  • then retain 23%
  • expected return on new projects = 22.4%
  • Re = 10.7%

growth rate = retention rate x return on new projects

g₁ = not given                                       EPS₁ = $2.775  

g₂ = 1 x 22.4% = 22.4%                        EPS₂ = $3.3966

g₃ = 1 x 22.4% = 22.4%                        EPS₃ = $4.1574

g₄ = 0.48 x 22.4% = 10.752%              EPS₄ = $4.6044

g₅ = 0.48 x 22.4% = 10.752%              EPS₅ = $5.0995

g₆ = 0.23 x 22.4% = 5.152%                EPS₆ = $5.3622

dividend payout ratio                            expected dividend

year 1 = 0                                                   $0

year 2 = 0                                                  $0

year 3 = 0.52                                             $2.1618

year 4 = 0.52                                             $2.3943

year 5 = 0.77                                              $3.9266

year 6 = 0.77                                              $4.1289

since the growth rate became constant at year 6, we can find the terminal value for year 5:

terminal value year 5 = $4.1289 / (10.7 - 5.152%) = $74.4214

P₀ = $0/1.07 + $0/1.07² + $2.1618/1.07³ + $2.3943/1.07⁴ + $3.9266/1.07⁵ + $74.4214/1.07⁵ = $0 + $0 + $1.7647 + $1.8266 + $2.7996 + $53.0614 = $59.45

3 0
3 years ago
Adidea Corp. Estimates that $5,670 of its accounts receivables are uncollectible. How will the company record the transaction? T
muminat

Answer and Explanation:

The journal entry to record the given transaction as follows:

Uncollectible account expense or bad debt Dr $5,670

        To Account receivable $5,670

(being uncollectible account expense is recorded)

Here the expense is debited as it increased the expenses and credited the account receivable as it decreased the asset

5 0
3 years ago
A _____ is a specially designed phone room used to conduct telephone interviewing.
katrin [286]

Answer:

central-location telephone (CLT) facility

8 0
2 years ago
Bobbi and Stuart are partners. The partnership capital of Bobbi is $35,300 and that of Stuart is $77,700. Bobbi sells his intere
SCORPION-xisa [38]

Answer:

The correct answer is:

John's capital account for $35,300 (c.)

Explanation:

In the admission of a new partner, the purchase of ownership from an existing partner to a new partner is entirely a personal transaction between the existing partner and the new partner, and the extent of partner bonus (the interest sold on the original partnership amount) is acquired by the exiting partner, but this bonus is not reflected in the partnership agreement, hence the amount credited into the new partner's account is the same as that owned previously by the exiting partner, irrespective of how much the partnership ownership was sold for.

Hence, since Bobbi's partnership capital was $35,300, John's account would be credited with the same amount even if the ownership was sold for $55,900, as the bonus goes to Bobbi.

7 0
3 years ago
Greg has developed an automobile engine that runs efficiently for up to three hours on a single russet potato. His friends have
natulia [17]

Answer:

Correct option is (a)

Explanation:

For any venture to be successful, it starts with a vision or idea. In this case, Greg is confident that he will be able to convince US Car manufacturers to purchase his fuel efficient car even though his friends were doubtful if his product will be accepted by car manufacturers.

He also had a clear vision as his goal was to make US economy energy efficient. Vision is to have a positive outlook regarding future.

It can be inferred that Greg has both vision and confidence

4 0
3 years ago
Read 2 more answers
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