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fgiga [73]
4 years ago
10

A company has outstanding debt with a market value of​ $250M and common stock with a market value of​ $550M. If its debt has a​

before-tax cost of​ 7%, a​ before-tax cost of equity of​ 10% and a corporate tax rate of​ 40%, what is its​ WACC? A. ​8.19% B. ​6.55% C. ​7.86% D. ​5.44%
Business
1 answer:
Roman55 [17]4 years ago
8 0

Answer:

A. ​8.19%

Explanation:

D  250

E  550

V  800

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

Ke 0.1

Equity weight 0.6875 (550/800)

Kd 0.07

Debt Weight          0.3125 (250/800)

t 0.4

WACC = 0.1(0.6875) + 0.07(1-0.4)(0.3125)

WACC 8.18750% = 8.19

The taxes doesn't affect the cost of equity. The equity doesn't provide a tax shield like debt. Taxes don't decrease the cost of equity.

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A key to positioning a product or brand effectively is discovering the perceptions of its potential customers. In determining it
Masja [62]

Answer:discover where the company's product or brand is on these attributes in the minds of potential customers.

Explanation: The position of a product in the minds of Customers or consumers is a vital factor in determining the sales that can be generated from the product. The perception of potential customers is necessary,so a good marketer or business organisations must ensure that it works to improve upon the perception of its customers concerning it's products or services.

discovering where the company's product or brand is on these attributes in the minds of potential customers is one of the four steps required.

8 0
3 years ago
Why isn't marketing given a place of importance in the organizational hierarchy?
Tpy6a [65]

Answer:It is true that in many organization marketing does not have a place of importance in the organizational hierarchy as spending on marking cuts on their profit making. These firms need no marketing strategies as they are on regional or street or local level. Theses are small business. The customer base of these firms is near by public. These firms don’t work to reach far away customers

Explanation:

4 0
3 years ago
Which of the following cannot be shown on a production possibilities graph?
choli [55]
I believe the answer is: <span>the allocation method

production possibilities graph could only include the factors that can be projected after doing combination of various products' production.
Allocation method only play role in the technique that can be used to produce the products and cannot be considered as data projection from the production

</span>
5 0
4 years ago
Read 2 more answers
In one year, Hitech Microdevices will pay a common stock dividend of $4.35. You predict that you will be able to sell your Hitec
Andre45 [30]

Answer:

Price to be paid now = $52.89

Explanation:

<em>The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return. </em>

T<em>he stock would be held for just a period, hence we would use the single period return model. This is given as follows:</em>

Price now  = D/(1+r) + P×(1+r)

Dividend , r - rate of return, P -year-end price of stock

Dividend = 4.35, r-16%, P- 57

Price = 4.35/(1.16)  + 57/(1.16)= $52.89

Price to be paid now = $52.89

7 0
3 years ago
Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, stock issued for equ
trasher [3.6K]

Answer:

No, it will not be classified on cash flow statement.

Explanation:

In the given case, stocks are issued in exchange of equipment. Assuming no cash is involved even for the balancing amount.

Since, cash flow statement records all transactions involving cash the exchange of stock issued for equipment, is nowhere involving cash thus, it will not be depicted on cash flow statement.

Final Answer

No it will not be classified on cash flow statement.

4 0
3 years ago
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