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hammer [34]
3 years ago
10

(14 points) A financial analyst determines that Cyclone Company has $54 million of interest bearing debt outstanding and 3,800,0

00 common shares outstanding at the end of 2019. She also estimates that Cyclone’s after-tax cost of debt is 6.30% and that its cost of equity using the capital asset pricing model is 9.72%. The company pays a $2.00 dividend and has a current stock price $45.60 per share. The company has a marginal income tax rate of 37%. Required: a. Compute the company's weighted average cost of capital. b. Assuming that Cyclone’s dividend will last into perpetuity what cost of equity capital is inferred by the current stock price? c. Assuming that the financial analyst has properly calculated the cost of equity capital and that Cyclone will pay a dividend of $2.70 next year what growth rate is implied by the current stock price?
Business
1 answer:
-Dominant- [34]3 years ago
8 0

Answer:

CYCLONE COMPANY

a.                                                          Value                   r               Harsh total

      Interest bearing debt                   $54,000,000     0.03969    2,143,260

    Common share(3,800,000*$45.60)<u>173,280,000</u>   0.0972      <u>16,842,816</u>

                                                          <u>   227,280,000</u>                        <u>18,986,076</u>

Weighted average cost of capital =  18,986,076/227,280,000 =

                                                       = 0.0835 = 8.35%

r for debt =  6.30%*( 1 - 0.37)  = 3.969% = 0.03969

b.  cost of equity  =   D/P   =   $2/$45.60 = 0.0439 =  4.49%

c.     D1  = D(1+g)

     $2.70 =  $2(1 + g)

      1+g  =  $2.70/$2

     1 + g = 1.35

    g = 1.35 - 1  =  0.35

    g =  35%

Explanation:

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Answer:

Date       Account Titles and Explanation        Debit           Credit

1-Nov     Cash Dividends                             $42,000

              (8,400 shares x $5)

             Dividends Payable                                                   $42,000

             (To record dividends payable)  

1-Dec      No entry on this date

31-Dec     Dividends Payable                     $42,000  

                Cash                                                                        $42,000

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Which of the following examples is the best demonstration of a qualification profile?​
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The correct answer is C. Highly motivated IT, college graduate, with software design internship. Experience with Java, XML, and HTML. Logical and systematic problem-solver; capable of independently troubleshooting and performing complex coding tasks.

Explanation:

Qualification profiles should mention the qualifications of a candidate for a specific job or position. This includes information about the education, skills, and even experiences of the individual. Moreover, a qualification profile should be brief and should be written using the third person.

All of these requirements are met only in option C because this includes information about education "IT college graduate", experience "experience with Java, XML..." and relevant skills for this job "problem-solver, capable of independently troubleshooting...". Also, this is brief but still includes more information about qualifications than other options. Finally, this is written using the third person as the author avoids the use of words such as "I".

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Under the laws of agency, partners of a CPA firm may be liable for the work of others on whom they rely. This would not include:
irga5000 [103]

Answer: employees of the audit client.

Explanation:

The options to the question are:

A. employees of the CPA firm.

B) employees of the audit client.

C) other CPA firms engaged to do part of the audit work.

D) specialists employed by the CPA firm to provide technical advice on the audit.

Agency law simply means the agent-principal relationships which is a relationship whereby one party has a legal authority to act and represent the other party.

Based on the above question, the partners of CPA firm are liable for the work of the firm that they are representing. In this case, they'll be liable for the employees of the CPA firm, other CPA firms engaged to do part of the audit work and the specialists employed by the CPA firm to provide technical advice on the audit.

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