Answer:
a.cost of common equity is 14.40%
b.WACC is 10.62%
c.Midwest Electric Company should accept project A since it has a rate of return higher than WACC of 10.62%
Explanation:
The cost of common equity can be ascertained using the stock price formula and changing the subject of the formula to r(cost of common equity)
Stock price=Do*(1+g)/(r-g)
stock price is $20
g is the dividend growth rate at 4%
Do is the dividend just paid $2
20=2*(1+4%)/(r-4%)
20=2.08/r-4%
20(r-4%)=2.08
r-4%=2.08/20
r=(2.08/20)+4%
r=14.40%
WACC=Ke*E/V+Kd*D/V*(1-t)
Ke is the cost of equity of 14.40%
E is the 55% or 0.55
D is 45% or 0.45
V=E+D=045+0.55=1
Kd is the cost of debt which is 10%
t is the tax rate at 40% or 0.40
WACC=14.40%*0.55/1+10%*0.45/1*(1-0.4)
WACC=(14.40%*0.55/1)+(10%*0.45/1*0.6)
WACC=10.62%
Midwest Electric Company should accept project A since it has a rate of return higher than WACC of 10.62%
By selling christmas trees from late november through december, home improvement is providing time utility.
This type of utility occurs when a company provides goods and services when consumers demand or need them. Companies analyze how to create or maximize the time utility of their products and adjust their production process, logistical planning of manufacturing, and delivery.
So when demand increases, the company should respond by producing and delivering more of the product to the market.
Economic utility is the total amount of satisfaction experienced when a product or service is consumed.
To know more about time utility here:
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Answer:
Total= $292,520
Explanation:
Giving the following information:
Zhang Industries sells a product for $750. Unit sales for May were 400 and each month's sales are expected to grow by 3%. Zhang pays a sales manager a monthly salary of $4,000 and a commission of 2% of sales in dollars. Assume 30% of Zhang's sales are for cash. The remaining 70% are credit sales; these customers pay in the month following the sale.
Cash budget for June:
Sales= [(400*1.03)*750]*0.3= 92,700
Sales from May= (400*750)*0.7= 210,000
Salary= (4,000)
Commision= [(400*1.03)*750]*0.02= (6,180)
Total= $292,520
Answer
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
The answer is "10%".
<span>price of a hairpiece was increased from $500 to $550
So, the difference is = 550 - 500 = $50
original price = $500
now, divide the </span><span>difference between the prices by the original price:
50/500 = 1/10
now to get percentage multiply it with 100;
1/10 x 100 = 10%</span>
