Answer: False
A firm's weighted average cost of capital is a function of the capital structure mix
Explanation:
The capital structure of a firm is the proportion of debt and equity that result in the lowest weighted average cost of capital (WACC) .
A firm’s total cost of capital is a weighted average of the cost of equity and the cost of debt, known as the weighted average cost of capital (WACC).
The formula is equal to:
WACC = (E/V x Re) + ((D/V x Rd) x (1 – T))
Where:
E = market value of the firm’s equity (market cap)
D = market value of the firm’s debt
V = total value of capital (equity plus debt)
E/V = percentage of capital that is equity
D/V = percentage of capital that is debt
Re = cost of equity (required rate of return)
Rd = cost of debt (yield to maturity on existing debt)
T = tax rate
Answer and Explanation:
The preparation of the income statement for the year ended Dec 31,2012 is shown below"
<u> Southeast Airlines, Inc.</u>
<u> Income statement </u>
<u> For the year ended December 31, 2012</u>
Revenue
Ticket Revenues $23,100
Total revenues $23,100 (A)
Less: Expenses
Aircraft Fuel Expense $9,900
Income Tax Expense $310
Interest Expense $250
Landing Fees Expense $4,300
Repairs and Maintenance Expense $2,400
Salaries and Wages Expense $3,460
Total expenses $20,620 (B)
Net income $2,480 (A- B)
Thank you for posting your question here. To answer the problem, i<span>f the risk-free rate is 5% and expected inflation rate is 16%, that would result in a total rate of 21%. Then divide 1 by 0.79 = 1.266. Therefore, my answer is a yield of 26.6% is required. Mind you, this is not scientific, but rather my best guess, but it can't be all wrong.</span>
Answer:
I and II only.
Explanation:
Return on equity (ROE) is an example of a profitability ratio.
Profitability ratios measures the ability of a company to earn profits from its assets.
ROE = Net income / Average total equity
If ROE increases, it means that net income increases more than average total equity
Total asset turnover = Revenue / average total assets
(Net Income/ Net profit margin) / Total Assets
All else remaining constant, if ROE increases, it means that revenue also increases more than average total asset
Since Net income is the numerator in ROE, it means it would also increase
Total asset and debt equity ratio is not a component of ROE, so the effect of ROE on them can't be determined