Answer :
True required initial investment = $26,954,178
Explanation :
As per the data given in the question, we need to do following calculations
Weighted average flotation cost = ( % flotation cost of debt × weight of debt) + (% flotation cost of preferred equity × weight of preferred equity) + (% flotation cost of common equity × weight of common equity)
= (3% × 35%) + (7% × 10%) + (10% × 55%)
= 0.0725
=7.25%
It means out of total capital which is raised 7.25%, would be the flotation cost.
Let total capital raised be X
So X × (1 - 7.25%) = $25 million
X = $25 million ÷ (1- 7.25%)
X = $26,954,178
Answer:
<h2>In this case,Huojin is basically using Life Cycle pricing strategy.</h2>
Explanation:
- In Economics, life cycle pricing strategy basically refers to the determination of any product or service price based on the position of the concerned product or service within its life cycle.
- In this instance,Huojin decides to charge higher price for its new product as the production or manufacturing is relatively high during the initial stages of the product.
- Later on during the product life cycle,the manufacturing or the making cost of the new product gradually decreases thereby,allowing Huojin to reduce the price of the product during the subsequent stages of the its life cycle.Such type pricing strategy is known as Life Cycle pricing strategy.
Lorenz curve shows income distribution, hence the correct answer is (D).
Explanation: Lorenz curve is the graphical distribution of the income distribution or wealth distribution. It is also known as probability plot. It has a line of equality (always 45 degrees) which depicts the fair means of income distribution and data when plotted on the curve tells that how much inequality prevails. Horizontal axis shows the increasing share of population and vertical axis shows the increasing percentage of total income received.
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Answer: D. The order in which they will be converted into cash or used in operations.
Explanation: Balance sheet is a record used in financial statements or booking keeping,it is used to record the Assets(the resources though which income will be generated by an entity),the liability (the materials or resources that are not intended to generate revenue they include debts), and shareholders Equity.
The Asset section of a balance sheet contains items According to the order in which they will be converted to cash for easy access and reporting.
Answer:
8.02 %
Explanation:
Weighted Average Cost of Capital (WACC) is the the cost required by holders of permanent source of capital pooled together.
WACC = Cost of Equity x Weight of Equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt
where,
Cost of Equity (CAPM) = 4 % + 1.08 x 7.5 %
= 12.10 %
Cost of Preferred Stock = 5%
Cost of Debt :
PMT = ($1,000 x 5.5%) ÷ 2 = $27.50
N = 19 x 2 = 38
PV = $1,000 x 104 % = - $1,040
P/YR = 2
FV = $1,000
I/YR = ??
Using a Financial calculator the YTM (which is the cost of debt) is 5.17 %
But,
We use after tax cost of debt.
After tax cost of debt = 5.17 % x (1 - 0.31) = 3.57%
also
Total Market Value = $5,720,000 + $7,700,000 + $1,961,000 = $15,381,000
Weight of Equity = 0.50
Weight of Preferred Stock = 0.13
Weight of Debt = 0.37
therefore,
WACC = 12.10 % x 0.50 + 5% x 0.13 + 3.57% x 0.37
= 8.02 %