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eduard
3 years ago
7

A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturit

y of 5.04% and a value of $3,500,000. The firm has 1,000,000 common shares outstanding at a value of $6/share. You look up the asset beta for firms in the same industry (SIC) code and determine that value is 1.15. The firm plans on keeping it's D/E ratio constant (at the current level) going forward and the tax rate is expected to be 35%. The beta of the firms debt is estimated as 0.30, the risk free rate is 3% and the market return is 9.8%.
Required:
Find the WACC for above firm.
Business
1 answer:
BigorU [14]3 years ago
4 0

Answer:

WACC = 10.22%

Explanation:

market value of debt = $3,500,00

Rd = 5.04%

current market value of equity = 1,000,000 x $6 = $6,000,000

Re = 3% + (1.15 x 9.8%) = 14.27%

weight of debt = $3,500 / $9,500 = 36.84%

weight of equity = $6,000 / $9,500 = 63.16%

WACC = (63.16% x 14.27%) + (36.84% x 5.04% x 65%) = 9.01% + 1.21% = 10.22%

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Which of the following is the LEAST important consideration for safeguarding business assets? Options
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Answer:

Out of the options listed the LEAST important consideration for safeguarding business assets is:

4) geography

Explanation:

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For this you must have a clear idea of what an asset is: an asset is a belonging whose ownership is entitled to a person. In this sense, bank accounts, apartments or houses, yates, cars, stocks, bonds are all examples of assets.

Nowadays there are several instruments in order to protect an asset: insurances, putting assets in the name of your spouse or a company. Regardless in the protection measure you use to cover your assets you must have clear, what is the type of asset you want to protect, the monetary value, and the physical size. but geography does not get to be an important consideration when safeguarding them.

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Iaci Company makes two products from a common input. Joint processing costs up to the split-off point total $42,000 a year. The
eimsori [14]

Questions

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Answer:

Net advantage from further processing  $1,200<u> </u>

Explanation:

A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.  

Also note that all the joint costs incurred up to the split-off point are irrelevant to the decision to process further any of the .

Net monetary advantage of product X

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Sales revenue after the split-off point                          44,800

Sales revenue at the split-off point                             <u>  (32,000)</u>

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Further processing cost                                                    <u>(11,600)</u>

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Answer:

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