Answer:
1.075
Explanation:
The computation of the profitability index is shown below:
= Net Present value ÷ Required investment
where,
Net Present value
= Annual cash inflows × PVIFA for 8 years at 12%
= $92,000 × 4.9676
= $457,019.2
0
Refer to the PVIFA table
And, the required investment is $425,000
So, the profitability index is
= $457,019.2
0 ÷ $425,000
= 1.075
Answer:
(a) 8.90%
(b) 3.00%
Explanation:
(b) After tax cost of debt:
= pretax cost of debt (1 - relevant tax rate)
= 5% × (1 - 0.4)
= 3.00%
(a)
Equity:
Market value = 65
weight = 0.65
WACC = weight × cost of equity
= 0.65 × 0.12
= 7.80%
Preferred stock:
Market value = 5
weight = 0.05
WACC = weight × cost of equity
= 0.05 × 0.04
= 0.20%
Debt:
Market value = 30
weight = 0.30
WACC = weight × cost of equity (after tax)
= 0.30 × 0.03
= 0.90%
Therefore,
Mullineaux’s WACC:
= 7.80% + 0.20% + 0.90%
= 8.90%
Answer:
the unit holding cost is $10.5
Explanation:
The computation of the unit holding cost h of bandages is shown below;
= Price of bandages × holding cost percentage
= $70 × 15%
= $10.5
By multiplying the price of bandages with the holding cost percentage we can get the unit holding cost h of bandages
Hence, the unit holding cost is $10.5