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wariber [46]
3 years ago
12

The company cost of capital for a firm with a 60/30/10 debt/common/preferred split, 8% cost of debt, 15% cost of equity, preferr

ed stock sells for $50 today, and will pay a $6 dividend in year 1. Assume a 35% tax rate, solve for WACC.
a. 7.02%
b. 8.82%
c. 10.50%
d. 13.62%
Business
1 answer:
sveticcg [70]3 years ago
6 0

Answer:

b. 8.82%

Explanation:

WACC = Cost of equity x Weight of equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt

Cost of Preferred Stock calculation :

Cost of Preferred Stock = Expected dividend / Market Price x 100

                                        = $6 / $50 x 100

                                        = 12 %

After tax cost of debt calculation :

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

                                    = 8 % x (1 - 0.35)

                                    = 5.20 %

therefore,

WACC = 15% x 30 % + 12 % x 10 %+ 5.20 % x 60 %

           = 8.82 %

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Answer:

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Predetermined overhead = [(Estimated overhead / Expected labor cost) × 100]

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Then,

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Which of the following cash flows should be included in the investing Section of the statement of cash
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Answer:

Cash flow items to be included in the investing section of the statement of cash flows under US GAAP

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Explanation:

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Some examples of investment activity from the company’s perspective would include:

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A company's sales in Seattle were $410,000 in 2012, while their sales in Portland were $290,000 for the same year. Complete the
REY [17]

Answer:

a)   41.38%

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c)  70.73%

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We should check agsint whom is the comparrison to deteminate the base.

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