Answer: 8.23%
Explanation:
Firstly, we will calculate the cost of debt which will be:
= Yield (1-Tax rate)
= 9% × (1-0.34)
= 9% × 0.66
= 5.94%
Then, the Cmcost of preferred stock will be:
= 7/(104-9.40)
= 7/(94.6)
= 7.39%
We will also get the value of the cost of equity which will be:
= (Dividend expected common/Price common) + growth rate
= (2.50/76) + 8%
= 3.29% + 8%
= 11.29%
For Debt:
Cost after tax: 5.94
Weight = 50%
Weighted cost = 5.94 × 50% = 2.97
For Preferred stock:
Cost after tax: 7.39
Weight = 1%
Weighted cost = 7.39 × 10% = 0.74
For Common equity
Cost after tax: 11.29
Weight = 40%
Weighted cost = 11.29 × 40% = 4.52
Weighted average cost of capital = 2.97 + 0.74 + 4.52 = 8.23%
Risle Incorporated is a paper supply company. One of its largest customers is Allende Publishers, a publishing house that makes books. If Risle Incorporated decides to acquire and merge with Allende, the merger is most likely to be called a vertical merger.
<h3>
What is vertical merger?</h3>
A vertical merger is the union of businesses that operate at various phases of the production process, such as raw materials, finished goods, and distribution. A merger between a steel manufacturer and an iron ore producer serves as an illustration.
Some characteristics of vertical merger are-
- A vertical merger is when two or more businesses come together to provide various supply chain services for a single item or service.
- Most frequently, a merger is implemented to boost business, get more control over the supply chain process, and create synergies.
- Usually, a manufacturer and a supplier are involved. Contrarily, a competitor in the same industry as the purchasing company is acquired in a horizontal merger.
- A vertical merger's primary goals are to gain market share, boost productivity, and maximize cost reductions in order to generate larger profits.
- An example of a vertical merger would be an automaker combining with a parts supplier.
- A arrangement like that would give the car division better access to parts pricing and increased manufacturing process control.
- In turn, the components section would be ensured a consistent flow of business.
To know more about vertical merger, here
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Answer:
c. $980,200
Explanation:
The computation of the cash collections is shown below:
As January sales is $839,000
So, Cash sales
= $839,000 × 20%
= $167,800
So Credit sales
= $839,000 × 80% × 75%
= $503,400
And on January 1 , the account receivable is $309,000
So, the January cash collections from sales is
= $167,800 + $503,400 + $309,000
= $980,200
