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baherus [9]
3 years ago
11

1. Peter's Audio Shop has a before-tax cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The fir

m has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop?
Business
1 answer:
tia_tia [17]3 years ago
7 0

Answer:

9.14%

Explanation:

The computation of the weighted average cost of capital is shown below:-

Debt = $500,000 × 1.02

= $0.51 m

Preferred = 40,000 × $34

= $1.36 m

Common = 104,000 × $20

= $2.08 m

Total = $0.51 m + $1.36 m + $2.08 m

= $3.95 m

So, Weighted average cost of capital = ($2.08 ÷ $3.95 m × 0.11) + ($1.36 m ÷ $3.95 m × 0.08) + (($0.51 m ÷ 3.95 m × 0.07 × (1 - 0.34))

= 0.057924 + 0.027544 + 0.005965

= 0.091433

or 9.14%

Therefore for computing the weighted average cost of capital we simply applied the above equation.

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Blossom Corporation has fixed costs of $274,950. It has a unit selling price of $9.30, unit variable cost of $7.85, and a target
morpeh [17]

Answer:

1,231,000 units

Explanation:

Given that,

Fixed costs = $274,950

Selling price = $9.30 per unit

Unit variable cost = $7.85

Target net income = $1,510,000

Contribution margin:

= Sales per unit - Variable cost per unit

= $9.30 - $7.85

= $1.45

Target Contribution margin:

= Fixed costs + Target income

= $274,950 + $1,510,000

= $1,784,950

Units to be sold:

= Target Contribution margin ÷ Contribution margin

= $1,784,950 ÷ $1.45

= 1,231,000 units

6 0
3 years ago
In the context of the number and the intensity of external factors in the environment that affect organizations, a(n) _____ is d
xxMikexx [17]

Answer:

simple environment

Explanation:

Organizational environment can be regarded as internal as well as external environmental factors which can influence the activities and

decision making of the

organization. The environment of an organization has a surroundings which has favourable or unfavorable effects on its operations. simple environment is one with a limited environmental factors which can influence or affect the operation of the organization, the intensity of external factors that affects

simple environment is very low compare to complex environment. It should be noted that In the context of the number and the intensity of external factors in the environment that affect organizations, simple environment is defined as an environment with few environmental factors.

4 0
3 years ago
Consider a $1000 bond that pays an annual interest rate of 8% and matures in two years. The prevailing interest rate has dropped
Anika [276]

Answer:

Current bond price = 80 / (1+0.04)^1 + 1080 / (1+0.04)^2

Explanation:

The Coupon payment = 0.08 * 1000 = 80

The Payment at EOY 1 = 80

The Payment at EOY 2 = 80 + 1000 = 1080

market interest rate = 4%

Current bond price = 80 / (1+0.04)^1 + 1080 / (1+0.04)^2

7 0
3 years ago
Mia, an administrative assistant in the business division of a university, is assigned the responsibility of serving the needs o
Anika [276]

Answer: The professors have failed to engage Mia.

Explanation: Since Mia is an administrative officer, assigned with the role of serving the needs of the division's professor, her having plenty of ’free time’ simply tells the professors do not engage her well enough in her primary duty as an administrative officer to keep her busy.

4 0
4 years ago
________ offer a limited assortment of general merchandise at very low prices and are often found in lower-rent locations.
True [87]

Answer:

D. Extreme Value Retailers

Explanation:

I majored in Business

7 0
3 years ago
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