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Igoryamba
3 years ago
8

argaryen Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt.

Its cost of equity is 10 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 23 percent.a. What is the company’s WACC?
Business
1 answer:
steposvetlana [31]3 years ago
5 0

Answer:

WACC =  8.41%

Explanation:

<em>The weighted Average cost of Capital is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool.. </em>

After-tax cost of debt = (1- tax rate) × before tax cost of debt

                                   = (1-0.23)×  6% = 4.6%

Type                         Cost (%)               Weight               cost × weight

Equity                          10                          70                           7

Preferred stock          5                            5                             0.25

Debt                            4.6%                       <u>25  </u>                        <u>1.155 </u>

Total                                                       100                              8.405

WACC =  8.405 / 100   ×  100 = 8.41%

WACC =  8.41%

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During the last year, Len Corp. generated $1,170.00 million in cash flow from operating activities and had negative cash flow ge
Anit [1.1K]

Answer:

The firm’s cash flow (CF) due to financing activities in the second year is    - $450 million

Explanation:

As we know that,

Net increase in cash = Operating activity - investing activity - financing activity

where,

Net increase in cash = Ending balance of second year  - ending balance of first year

= $280 million - $200 million

= $80 million

The other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

$80 million = $1,170 million - $640 million + financing activity

$80 million = $530 + financing activity

So, financing activity = $80 million - $530 million

                                   = - $450 million

8 0
3 years ago
Labor-augmenting (improving) technology causes which of the following? (i) The marginal productivity of labor increases. (ii) Th
OleMash [197]

Answer:

Answer to this is both option (i) and option (iii).

Explanation:

Change in technology generally affects the change in productivity as well as the change in labor demand. In the case of Labor-augmenting (improving) technology, it is found that the positive change in technology leads to the increasing marginal productivity of labor. This increase of marginal productivity of labor shifts the labor-demand curve towards right. Thus, Labor-augmenting (improving) technology causes marginal productivity of labor to increase which further leads to shifting of the labor-demand curve towards right.

5 0
3 years ago
Identify whether the statements below are true or false by dragging and dropping the appropriate term into the bin provided.
Tema [17]

<u>Solution and Explanation:</u>

1. False-   Long run Economic growth is likely to be sustainable because of finite natural resources as othe man made resources will be available to sustain growth.  

2. False-    In mordern economy posesing few natural resources will not affect a country to develop economically; human resources and man made resources will also contribute. Foreign trade can also play an important role towards growth, in the absence of abundant natural resources.

3. True-   Natural resources are vital, and mostly exhaustible. Hence it is very essential to find suitable alternatives.

4. False- Economies of 21st century depend on human capital due to depletable atural resources.

5. True - In the 19th century, minerals and farming land were the most mportant resources, since self sustainability was in vogue.

7 0
4 years ago
Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development divisio
lakkis [162]

Answer:

True

Explanation:

Lilypad Toys should be vary of the imitators. Since they introduced a new technology in the market, it is bound to be copied by other manufacturers who will try to sell it in the same market for cheaper rates.

Lilypad Toys should come up with a patent for their technology to earn profit off of this technology and also save themselves from the raging competition from the imitating companies.

I hope the answer was helpful.

Thanks for asking.

4 0
3 years ago
Thompson Company incurred research and development costs of $100,000 and legal fees of $30,000 to acquire a patent. The patent h
wariber [46]

Answer:

b. 3,000

Explanation:

The computation of the  Patent Amortization Expense in the first year is shown below:

= Legal fees to acquire a patent ÷ estimated useful life

= $30,000 ÷ 10 years

= $3,000

Only the legal expense would be amortized in a year.

And, the lesser period of legal life i.e 20 years and useful life i.e 10 years would be taken in the computation part. So, the lesser time period would be considered i.e useful life of 10 years

7 0
4 years ago
Read 2 more answers
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