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Rom4ik [11]
3 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:
dsp733 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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Answer:

Explanation:

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5 0
3 years ago
Peak Performance Sporting Goods Company continues to perform well in spite of an economic recession. Company executives credit t
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Answer is 2,000,000 . I need to add a little more sorry for this sentence
3 0
3 years ago
Stock A has an expected return of 8%, stock B has an expected return of 2%, and the return on Treasury-Bills is 4%. You buy $200
Tomtit [17]

Answer:

The expected return of your portfolio is 6.02%

Explanation:

Stock     Value     Expected Rate of return   Weightage

  A          $200                   8%                      $200/$300 = 0.67

  B          $100                    2%                      $100/$300 = 0.33

Expected Rate of return = ( Expected rate of return Stock A x Weightage of Stock A ) + ( Expected rate of return Stock B x Weightage of Stock B )

Expected Rate of return = ( 8% x 0.667 ) + ( 2% x 0.33 )

Expected Rate of return = 0.0536 + 0.0066 = 0.0602 = 6.02%

3 0
3 years ago
(a)  Bank of Marienfield started its first day of operations with $150 million in capital. It received a total of $100 million i
Juliette [100K]

Here, we are going to prepare the balance sheet of Bank of Marienfield using the information given in the question..

  • Formula for Total liabilities is <em>Capital + Checkable deposit + Loan from bank</em>

<u>Given Information</u>

Capital = $150 Million

Checkable deposit = $100 Million

Loan from bank= $50 Million

Total liabilities = $150 Million + $100 Million + $50 Million

Total liabilities = $300 Million

<u>Additional given Information</u>

Commercial loan = $150 Million

Investment in shares = $120 Million

Investment in Treasury bonds = $20 Million

Required reserve = Checkable deposit * Required reserve rate

Required reserve = $100 Million * 10%

Required reserve = $10 Million

Excess reserve = Total liabilities - (Commercial loan + Investment in shares + Investment in Treasury bonds + Required reserve)

Excess reserve = $300 Million - ($150 Million + $120 Million + $20 Million + $10 Million)

Excess reserve = $300 Million - $300 Million

Excess reserve = $0 Million

                                  Balance sheet of Bank of Marienfield.

Assets                           Amount        Liability                        Amount

Required reserves       $10 million     Bank capital              $150 million

Excess Reserve            $0                  Checkable deposit  $100 million

Commercial loan          $150 million   Loan from bank        $50 million

Investment in shares    $120 million

Invest. Treasury bond  <u>$20 million </u>                                      <u>                       </u>

Total                              <u>$300 million</u>  Total                          <u>$300 million</u>  

3 0
3 years ago
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Stolb23 [73]

Answer:

b. Companies are benefiting from e-commerce by buying and selling their products and services to consumers online.

Explanation:

This is the example that shows the pure application of IT in business. E-commerce platforms are something every business that has an online presence has in common. Although businesses can differ by industry or niche, e-commerce is a common information technology trend.

The A. answer may indicate that it is IT related, but it is actually more related to globalization and outsourcing.

4 0
3 years ago
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