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katrin2010 [14]
3 years ago
15

You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equ

ity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 14.75%, and the tax rate is 40%. The firm will not be issuing any new stock.
1. What is Quigley's WACC?a. 10.08% b. 9.57% c. 12.60% d. 8.67% e. 10.48%
Business
1 answer:
slava [35]3 years ago
8 0

Answer:

The WACC of the firm is 10.08% and option A is the correct answer.

Explanation:

The WACC or the weighted average cost of capital is the average cost of capital to the firm based on its capital structure and the weights of all the components that form up its capital structure and their respective rate. The capital structure of a firm consists of debt, preferred stock and the common stock.

The formula for WACC is,

WACC = wD * rD * (1-tax rate)  +  wP * rP  +  wE  *  rE

Where,

  • wD, wP and wE represents the weight of debt, preferred stock and common equity component as a proportion of total assets
  • rD, rP and rE represents the cost of each component
  • rD * (1-tax rate) is taken as the after tax cost of debt is used for WACC

WACC =  0.35 * 0.065 * (1-0.4)  +   0.1 * 0.06   +   0.55 * 0.1475

WACC = 0.1008 or 10.08%

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The Dow Jones Industrial Average Index has an unusual weighting methodology . Unlike the S&P 500, it is weighted by share pr
Temka [501]

Answer: Goldman Sachs

Explanation:

If all shares rose by 5% in the value, the biggest contributor to the S&P 500 's upward movement would be the one with the highest weight from the listed options.

From the options listed, Apple has a weight of 4.955 , General Electric is not listed, Exxon Mobil has a weight of 2.1417 and Goldman Sachs has a weight of  5.1177.

Goldman Sachs has the largest weight and so would contribute the most.

8 0
3 years ago
What term describes a planned effort to enable employees to learn job-related knowledge, skills, and behavior
mihalych1998 [28]

Answer:

Training

Explanation:

Training is a form of teaching. It is a form of providing knowledge and skills and getting accommodated with those skills. These skills and knowledge help an individual to perform tasks with efficiency and competitiveness. Training helps in developing mental, physical, and professional skills in the individual. It helps in upgrading and enhancing mental and physical skills.

5 0
3 years ago
Which type of password would be considered secure? AYour social media handle and current age. BA line from your favorite song. C
Sholpan [36]
D, none of the above
8 0
3 years ago
Read 2 more answers
Which one of the following stocks is correctly priced according to CAPM if the risk-free rate of return is 3.4 percent and the m
MrRissso [65]

Answer:

D) Beta .98 expected return .107

Explanation:

In CAPM (Capital Asset Pricing Model), expected return = risk-free rate + Beta * market risk premium = 3.4% + Beta * 7.4%

We try every choice consecutively

A) Beta .87  expected return .096

⇒ expected return = 3.4% + 0.87 * 7.4% = 0.098

A is wrong

B) Beta 1.09   expected return .102

⇒ expected return = 3.4% + 1.09 * 7.4% = 0.1147

B is wrong

C) Beta 1.62 expected return .146

⇒ expected return = 3.4% + 1.62 * 7.4% = 0.154

C is wrong

D) Beta .98 expected return .107

⇒  expected return = 3.4% + 0.98 * 7.4% = 0.107

D is TRUE

E) Beta 1.16   expected return .139

⇒ expected return = 3.4% + 1.16* 7.4% = 0.12

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6 0
3 years ago
PLEASE HELP ME!!! (3 questions and each question is in the picture)
Otrada [13]

Explanation:

1) 35 lawns x 12 weeks = 420 lawns total

420 x $24.25 = $101.85

2) 20 lawns x 12 weeks = 240 lawns total

240 x $24.25 = $58.20

3) 5 lawns x 12 = 60 lawns total

60 x $24.25 = $14.55

————————————————————————————————————————

1) Fixed cost: 420 + variable cost: $24.25

Total cost: $101.85

2) Fixed cost: 240 + variable cost: $24.25

Total cost: $58.20

3) Fixed cost: 60 + variabl cost: $24.25

Total cost: $14.55

————————————————————————————————————————

I’m not sure About the last one sorry.

4 0
3 years ago
Read 2 more answers
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