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Elodia [21]
3 years ago
14

The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and th

e market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 40%.
a. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Cost of equity capital %
b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
Business
1 answer:
UkoKoshka [18]3 years ago
4 0

Answer:

Cost of equity is 11.2%

WACC is 8.74%

Explanation:

The formula for cost of equity is given below:

Cost of equity=risk free rate+(Beta *risk premium)

risk free rate is the treasury bill rate of 4%

Beta is 0.9

market risk premium is 8%

cost of equity=4%+(0.9*8%)=11.2%

WACC=Ke*E/V+Kd*D/V*(1-t)

Ke is the cost of equity of 11.2%

Kd is the cost of debt of 5%

t is the tax rate of 40% or 0.4

E is the equity weighting of 70% or 0.7

D is the debt weighting of 30% or 0.3

V is the E+D=0.7+0.3=1

WACC=11.20% *0.7/1+(5%*0.3/1*(1-0.4)

WACC=7.84% +0.90% =8.74%

       

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The average price of personal computers manufactured by MNM Company is $1,200 with a standard deviation of $220. Furthermore, it
crimeas [40]

Answer:

The required probability is 0.066807

Explanation:

Given,

σ = 220

μ = 1200

The probability that a random selection of computer which will have the price of at least $1,530 is computed as:

P (X ≥ 1530 ) = 1 - P (X ≤ 1530)

= 1 - P ( X - μ / σ)

= 1 - P ( 1530 - 1200 / 220)

= 1 - P ( z ≤ 1.5)

= 1 - 0.933193

= 0.066807

Note: This 0.933193 value is taken from the z table.

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3 years ago
Fiber-optic cable most likely would be used in a business network when (1 point) saving money is more important than speed. the
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When electrical or magnetic interference is present
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3 years ago
Soprano Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run
Nuetrik [128]

Answer:

$850,000

Explanation:

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8 0
3 years ago
Pedregon Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 6.95 Direct labor
Paraphin [41]

Answer:

The correct answer is $27,675.

Explanation:

According to the scenario, the given data are as follows:

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Fixed manufacturing OH = $19,800

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So, we can calculate the total amount of manufacturing overhead cost by using following formula:

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Where, Total variable OH = $1.75 × 4,500 = $7,875

By putting the value, we get

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7 0
3 years ago
Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles. Her latest speculative position is to profit fro
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Answer:

Cachita should buy put on yen

Explanation:

Given:

The current spot rate = ¥120.00​/$

in US $/¥ = \frac{\textup{1}}{\textup{120.00}}

or

in US $/¥ = 0.0083

Maturity time = 90 days

                                     Put on Yen                  Call on Yen

Strike Price                     125/$                           125/$

Strike Price in $/¥        0.008                            0.008

Premium                      0.00003/$                0.00046/$

Therefore,

Here the strike price for put on Yen and call on Yen are same

but the premium for Put on Yen is less than the premium for the call on Yen

Therefore, Cachita should buy a put on yen to get the profit from the rise of the dollar        

5 0
3 years ago
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