You just celebrated your first full year in business. You earned

Costly Corporation is considering a new preferred stock issue. The preferred would have a par value of $1000 with an annual divi

shutvik [7]

Answer:

28.63%

Explanation:

The computation of the cost of preferred stock is shown below:

Cost of the preferred stock = Dividend ÷ Price of the stock

where,

Dividend is

= $1,000 × $15%

= $150

And, the price of the stock is

= Market value of the stock - flotation cost

= $576 - $52

= $524

So, the cost of preferred stock is

= $150 ÷ $524

= 28.63%

We ignored the marginal tax rate i.e 40%

3 0

3 years ago

First National Bank charges 13.1 percent compounded monthly on its business loans. First United Bank charges 13.4 percent compou

FinnZ [79.3K]

Answer:

EAR for First national Bank = 13.92 %

EAR for First United Bank = 13.85 %

Explanation:

given data

First National Bank charges = 13.1 percent

compounded monthly , 1 year = 12 month

First United Bank charges = 13.4 percent

compounded semiannually , 1 year = 2 semiannually

solution

we get here first EAR for First national Bank that is express as

EAR for First national Bank = $(1+ \frac{r}{n} )^n - 1$ .....................1

here r is rate and n is month

so put here value

EAR for First national Bank = $(1+ \frac{0.131}{12} )^{12} - 1$

EAR for First national Bank = 13.92 %

and

EAR for First United Bank is

EAR for First United Bank = $(1+ \frac{r}{n} )^n - 1$ ..................2

here r is rate and n is semi annually

EAR for First United Bank = $(1+ \frac{0.134}{2} )^2 - 1$

EAR for First United Bank = 13.85 %

here First United bank EAR is less

5 0

3 years ago

According to this warranty, if the camera has had its serial number removed, would it be repaired?

bezimeni [28]

No, It would not be because it does not have a serial number.

4 0

3 years ago

Read 2 more answers

In 1–3 sentences, explain the role of entrepreneurs in the economy.

jenyasd209 [6]

ANSWER: There are many ways how entrepreneurs benefit the economy. Few of them are

1) Create Jobs: Entrepreneurs create jobs in the community. When someone opens a new business or expands his new business, he will need human resource to help him to do his works.

2) Wealth Creation: Entrepreneurs pool in their own money and attract investment from lenders, banks and other investors. This mobilizes public wealth.

3) Exports: Entrepreneurs after growing in their businesses will want to export their products as a part of extending their market. This will help gain foreign currency in the country.

4 0

3 years ago

Read 2 more answers

You are given the following information for Cleen Power Co. Assume the company’s tax rate is 40 percent. Debt: 5,000 6.6 percent

Misha Larkins [42]

Answer:

WACC = 8.84%

Explanation:

Face value= $ 1000 (assume)

Current price = 1000* 109% = 1090

semianual interest =1000 *.066*6/12 = 33

semiannual months = 20 *2 = 40

Yield to maturity of bonds = [semiannual interest +(face value -current price) /months]/[(face value+price)/2]

= [33 + (1000- 1090 )/40 ]/[(1000 +1090)/2]

= [33 + (-90/40) ] / [2090 /2]

= [33 - 2.25 ] /1045

= 30.75 /1045

= .0294 or 2.94% semiannually or (2.94*2) =5.88 % annually

After tax cost of debt = 5.88 (1- .40 ) = 3.528 %

Market value of bond = 1090 *5000 = $ 5450000

b)cost of equity =Rf +[beta*market premium ]

= 4.6 + [1.12 * 5]

= 4.6 + 5.6

= 10.20 %

market value of equity = 380000*56 =$ 21280000

Total market value of debt and equity =5450000 +21280000

= $ 26730000

weight of debt = 5450000/26730000 = .2039

weight of equity = 21280000 /26730000 = .7961

WACC = (after tax cost of debt *WD)+(cost of equity *We)

= (3.528 * .2039 )+(10.20 * .7961)

= .7194 + 8.1202

= 8.84%

7 0

3 years ago