Answer:
10.12%
Explanation:
The computation of the WACC is shown below:
= Cost of debt × (1 - tax rate) × weight of debt + cost of equity × weight of equity
= 6% × (1 - 0.21) × 0.35 ÷ 1.35 + 12% × 1 ÷ 1.35
= 1.23% + 8.89%
= 10.12%
We simply multiplied the capital structure with each of its weight so that the WACC could come and the same is to be considered
This is because the lowest is the most efficient amout to make. As we increase number the extra costs of making those items will also increase.
Answer:
Arbitrage opportunity may exists as the ZCBs selling at different price at same time due to change in their YTM .
The PV of 100 face value zcb with different ytm are different , in this case.
for one year maturity with face value 100 current price = fv/ pv at 8% = 92.59
for Two year maturity with face value 100 current price = fv / Pv at 9% for two years = 84.167 , if the bond holder sell the bond after 1 year only, the price = 91.74 .
a) The arbitrage opportunity exist with buy two bond with face value 100 with maturity of 1 year and face value 110 with maturity of 2 years.
b) profit 0.01 , as difference between PV of both bond at their YTM rate.
Answer:
$4,392
Explanation:
Sunland Company
Therefore the costs are eliminated if they outsource the manufacturing:
Direct materials $9,576
Direct labor $12,882
Variable overhead $14,364
Total $36,882
Their new cost is ($2.85 X 11,400) $32,490
$36,882 - $32,490 = $4,392
If Sunland accepts the offer the net income increase (decrease) by $4,392
