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Rom4ik [11]
2 years ago
9

has a target debt−equity ratio of 1.35. Its WACC is 8.3 percent, and the tax rate is 35 percent. If the company’s cost of equity

is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter yo
Business
1 answer:
dsp732 years ago
5 0

Answer:

5.74%

Explanation:

WACC = weight of equity x cost of equity +  weight of debt x cost of debt x (1 - tax rate)

weight of debt =  D / (D + E) = 1.35/ (1.35 + 1) = 0.574468 = 57.4468%

weight of equity = 100% - 57.4468% = 42.5532%

let x represent pretax cost of debt

8.1% = 0.425532 x 14% +( 0.574468x) x 0.65

8.1% = 0.373404x + 5.957448%

solve for x

x = 5.74%

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A firm uses 80 hours of labor and 6 units of capital to produce​ 10,000 gadgets per day.​ Labor's marginal product is 4 gadgets
Andreas93 [3]

Answer:

Use more labor and fewer capital.

Explanation:

Given that,

For producing 10,000 gadgets,

Labor hours use = 80

Capital = 6 units

Marginal product of labor = 4 gadgets per hour

Marginal product of capital = 20 gadgets per unit

Cost of each unit of labor = $8 per hour

Cost of each unit of capital = $50 per unit

Therefore,

Marginal product per dollar for labor is as follows:

\frac{MP_{L} }{w} =\frac{4}{8}

        = 0.5

Marginal product per dollar for capital is as follows:

\frac{MP_{k} }{r} =\frac{20}{50}

        = 0.4

Hence, the marginal product per dollar for labor is greater than the marginal product per dollar for capital, which means that the firm should use more labor and fewer capital.

5 0
3 years ago
Farm Country and Industry Country are two neighboring countries. Both countries produce only one​ good: good X. Production in bo
matrenka [14]

Answer:

B) the same amount of capital and labor

Explanation:

Only an increase in productivity shifts the production function upward given that all factors of production remain the same. Generally technology improves productivity and causes those shifts.  

Productivity measures the rate of output per unit of input. E.g. I write 10 pages per hour. If my writing productivity increases, I will write 12 pages per hour. Labor productivity is measured by the amount of output produced per hour worked.

3 0
3 years ago
calculate the unadjusted rate of return for an investment that has a net cost of $430,000 and should provide an average after-ta
Elden [556K]

9%, as the unadjusted rate of return is equal to the average yearly net income growth rate divided by the initial investment's net cost.

<h3>Calculation:</h3>

$40,090 divided by $430,00 is.093 * 100, or 9%.

<h3>If the needed rate of return is 6%, what is the present value of a cash inflow of $2,000 five years from now? Examine later?</h3>

$2600 will be given to the recipient after five years.

<h3>If the internal rate of return is 5% and the desired rate of return is 6%, should management accept the investment opportunity?</h3>

No, as the internal rate of return on the investment is lower than the intended rate of return.

To know more about unadjusted rate visit:-

brainly.com/question/13037420

#SPJ4

3 0
1 year ago
What are all points on the PPF called?​
jolli1 [7]

Answer:

Production Possibility Frontier (PPF or PPC)

All points inside PPF are inefficient points. These points are attainable (e.g., point U), but they are not using the resources at the fullest.

8 0
2 years ago
Hillside issues $2900000 of 9% 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. T
DaniilM [7]

Answer:

Dr. Cash                                                 $3,549,590

Cr. Premium on Account Receivable  $649,590

Cr. Bond Payable Account                   $2,900,000

Explanation:

The difference between the face value of the bond and the sale value of the bond is known as premium or the discount on the bond. If the face value is higher from the sale value the bond is issued on the discount and if the sale value of the bond is higher than the face value the bond is issued on the premium.

Premium on the Bond =  Face value - Sale value = $3,549,590 - $2,900,000  = $649,590

The Premium will be amortized during the life of the bond  to maturity and deducted from the interest expense.

3 0
3 years ago
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