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2 years ago

Adamson Corporation is considering four average-risk projects with the following costs and rates of return:

Business

1 answer:

Jlenok [28]2 years ago

7 0

Answer:

a. Cost of debt = Interest * (1 - Tax rate)

= 10%*(1 - 0.30)

= 7%

Cost of preferred stock = Dividend/ Issue price

= 5/48

= 10.42%

Cost of common stock (Cost of retained earnings) = (D1/P0) + g

= (4/33) + 0.07

= 0.12 + 0.07

= 0.19

= 19%

b. Fund Cost Weight Cost * Weight

Debt 7% 0.15 1.05%

Preferred stock 10.42% 0.10 1.042%

Retained earnings 19% 0.75 14.25%

WACC 16.342%

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Jiminy’s Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 6 percent 4 years ago. The bond cu

kirill [66]

Answer:

Explanation:

a.)

The total debt amount in Jiminy's Cricket Farm's balance sheet on the liabilities side is referred to as the book value of debt. It is calculated by be the summing up of the individual book values of the two bonds that this company has.

Total book value ;

Book value of 30 year bond = $60,000,000

Book value of the Zero-coupon bond = $35,000,000

Total book value of debt = $60 + $35 = $95,000,000

b.)

The sum of market values of the two bonds this company makes up the total market value of debt. It is calculated by multiplying the current price of the bond by the number of outstanding bonds.

Formula for market value = Price * number of bonds

30 year bond;

Number: 60,000,000/1000 = 60,000 bonds

Market value = 1.10 * 1000 *60,000 = $66,000,000

Zero-coupon bond;

Number: 35,000,000/1000 = 35,000 bonds

Market value = 0.67 * 1000 *35,000 = $23,450,000

Total market value of debt = $66,000,000 + $23,450,000 = $89,450,000

c.) Companies who have debt in their capital structure benefit from tax shield on their debt interest rates . Jiminy’s Cricket Farm has two bonds, find the average of the two rates to get after tax cost of debt.

Calculate the Pretax cost of debt first. Using a financial calculator, input the following;

30 year bond;

N = 30*2 = 60

PV = -$66,000,000

PMT = (6%/2)* $60,000,000 = $1,800,000

FV = $60,000,000

then compute semiannual rate; CPT I/Y = 2.664%

Convert to annual rate = 5.329% (this is the pretax cost of debt)

Zero-coupon bond;

N = 8

PV = -$23,450,000

PMT = 0

FV = $35,000,000

then CPT I/Y = 5.133% (this is the pretax cost of debt)

Next, find the average pretax cost of debt = (5.329% + 5.133%) /2 = 5.231%

After tax cost of debt = pretax cost of debt (1-tax)

After tax cost of debt = 5.231% (1-0.23) = 4.03%

5 0

3 years ago

LO 6.1TyeDye Lights makes two products: Party and Holiday. It takes 80,900 direct labor hours to manufacture the Party Line and

balu736 [363]

Answer:

The correct answer is B.

Explanation:

Giving the following information:

It takes 80,900 direct labor hours to manufacture the Party Line and 93,500 direct labor hours to manufacture the Holiday Line. Overhead consists of $225,000 in the machine setup cost pool and $149,960 in the packaging cost pool.

We need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (225,000 + 149,960) / (80,900 + 93,500)= $2.15 per direct labor hour

5 0

3 years ago

2.)

drek231 [11]

Answer:

sorry, I can't any answer

3 0

2 years ago

Jones and Johnson, a law firm, is expanding to incorporate three conference rooms and two executive waiting lounges in its offic

melamori03 [73]

Answer:

Space layout and function

Explanation:

The three dimensions of servicescape include:

Ambient conditions: air quality, room temperature, smell, music, lighting, etc.
Space layout and function: how equipment and furniture are laid out and arranged.
Signs, symbols and artifacts: corporate logos, decoration styles (including color), signs, etc.

6 0

2 years ago

Administrative:

Tema [17]

Answer:

Can you say what is the error

hope that helps you

please mark brainliest

please follow

6 0

3 years ago