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gogolik [260]
3 years ago
8

The market value of​ Fords' equity, preferred stock and debt are $ 6 ​billion, $ 2 ​billion, and $ 12 ​billion, respectively. Fo

rd has a beta of 1.8​, the market risk premium is 8​%, and the​ risk-free rate of interest is 4​%. ​ Ford's preferred stock pays a dividend of $ 2.50 each year and trades at a price of $ 25 per share. ​ Ford's debt trades with a yield to maturity of 10​%. What is​ Ford's weighted average cost of capital if its tax rate is 40​%?
Business
1 answer:
aniked [119]3 years ago
6 0

Answer:

10.12 %

Explanation:

Weighted Average Cost of Capital (WACC) is the cost of permanent sources of capital pooled together. It shows the risk of the business and is used to evaluate projects.

WACC = Cost of equity x Weight of Equity + Cost of Debt x Weight of Debt + Cost of Preference Stock x Weight of Preference Stock

<u>Remember to use the After tax cost of debt :</u>

After tax cost of debt = Interest x (1 - tax rate)

                                    = 10​% x ( 1 - 0.40)

                                    = 6.00 %

<u>Cost of equity :</u>

Cost of equity = Return from Risk free security + Beta x Risk Premium

                        = 4.00 % + 1.8 x 8.00%

                        = 18.40 %

<u>Cost of Preference Stock :</u>

Cost of Preference Stock  = Dividend / Market return x 100

                                            = $2.50 / $ 25 x 100

                                            = 10%

therefore,

WACC = 18.40 % x 30 % + 6.00 % x 60 % + 10.00% x 10%

           = 10.12 %

thus,

Ford's weighted average cost of capital is 10.12 %

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Answer:

There are different kind of careers that one can pursue in life; in order to choose a particular career, one has to consider some important factors.

The most important factor to consider in this case is your interest and passion. What are your interests? Which type of work can you do continuously every day and you will not be bored? That is the first thing you must figure out.

So, for an individual to consider pursuing a career in the education and training cluster, that person must have passion for imparting knowledge, he must be someone, who derive joy from teaching people and making them better than he met them.

Other important factors that must be considered include the following:

Suitable skills: you must have inborn talents that can be used in training people. Talents such as ability to express yourself clearly will help you in the education sector.  

Academic qualifications: depending on the specific level of education, where you want to get involved, you must be prepared to get the required qualifications. For instance, to teach at a University level, you must have a doctorate degree in your field.

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6 0
3 years ago
A company that makes modular bevel gear drives with a tight swing ratio for optimizing fork-lift vehicles was told that the inte
Troyanec [42]

Answer:

The APY is 14.9%

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To find the annual percentage yield we need to compute the effective annual rate of interest.

The Effective annual rate of return(EAR) is the equivalent rate to be paid where compounding is done frequently at period or interval less than a year.

Compounding implies the regular interval when interest is always computed; in this scenario, it is monthly.

The EAR can be worked out as follows

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. A rise in the price of corn will cause a (Click to select) in the Supply Curve for corn. b. A decrease in the price of seed (a
Nadusha1986 [10]

Answer:

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A change in price of a good leads to a movement along the supply curve and not a shift of the supply curve.

Other factors other than a change in the price of the good would lead to a shift of the supply curve. Such factors include :

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When the price of corn increases, the quantity supplied of corn increases. this is in line with the law of supply.

according to the law of supply, the higher the price, the higher the quantity supplied and the lower the price, the lower the quantity supplied.

This would lead to a movement up along the supply curve

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