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worty [1.4K]
3 years ago
14

A company's perpetual preferred stock currently trades at $87.50 per share, and it pays an $8.00 annual dividend. If the company

were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock?
a. 8.25%
b. 9.14%
c. 8.69%
d. 9.62%
Business
1 answer:
exis [7]3 years ago
5 0

Answer:

9.62%

Explanation:

The firm cost of preferred stock can be calculated as follows

Dividend= $8

Price= $87.50

Floation cost= 5%

= 5/100

= 0.05

= 8/87.50(1-0.05)

= 8/87.50(0.95)

= 8/83.125

= 0.0962×100

= 9.62%

Hence the firm cost of preferred stock is 9.62%

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Refer to the information in Homework 2 Question 2: Ross derives utility from only two goods, chocolates (x) and donuts (y). His
Margaret [11]

Answer:

The total effect is 35 out of which income effect is 15 and substitution effect is 20.

Explanation:

Ross has an income of $1440.

The price of chocolates (Px) is $10 and donuts (Py) is $9.

The utility function is given as

U = 0.5xy

Before price rise, Budget line:

1440 = 10x + 9y,

Consumption is optimal when

\frac{MUx }{ MUy} = \frac{Px}{Py} = \frac{10}{9} = 1.11

0.5y / 0.5x= 1.11

y = 1.11x

Substituting in budget line,

1440 = 10x + 9y = 10x + 9(1.11x)

1440 = 10x + 9.99x

19.99x = 1440

x = 72

y = 1.11x = 79.92 = 80

After price rise,

Py = 16.

New budget line:

1440 = 10x + 16y,

Price ratio

\frac{Px}{Py } =  /

=\frac{10}{16}

= 0.625

And,

\frac{MUx}{Muy} = \frac{0.5y}{0.5x} = 0.625

\frac{y}{x}  = 0.625

y = 0.625x

Substituting in new budget line: 1440 = 10x + 16y

1440 = 10x + 16(0.625)x

1440 = 20x

X = 72

Y = 0.625x = 45

So, total effect (TE)

= Decrease in consumption of y

= 80 - 45

= 35

With previous (x, y) bundle,

U = 0.5xy

U = 0.5 x 72 x 80

U = 2880

Keeping utility level the same & substituting,

y = 0.625x in utility function:

28800 = 0.5xy

2880 = 0.5\ \times\ 0.625x

2880 = 0.3125x^{2}

x^{2}  = \frac{2880}{0.3125}

x^{2} = 9216

x = \sqrt{9216}

x = 96

Now, putting the value of x,

y = 0.625\ \times\ x

y = 0.625\ \times\ 96

y = 60

Substitution effect (SE)

= 80 - 60

= 20

Income effect

= TE - SE

= 35 - 20

= 15

8 0
3 years ago
Which of the following values should be inserted to correctly balance the ledger shown below?
vredina [299]
In order to figure out this you would take the original balance
$120.70 and add the paycheck $343.52
from there you would then minus the City payment of $53.90 and minus the internet payment of $86.40
This would leave you with $323.96
Hope This helps :)
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2 years ago
Your selection committee is debating between two projects. Project A has a payback period of 18 months. Project B has a cost of
Kisachek [45]

Answer:

Project A

Explanation:

Given:

The payback period for the project A = 18 months

Cost of project B = $125,000

Expected cash flow for the first year for the project B = $50,000

Cash flow per quarter after first year = $25,000

Now,

Remaining cost for project B after the first year payment

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= $75,000

payback period for the project B after the first year

= \frac{\textup{Remaining cost}}{\textup{cash flow per quarter}}

= \frac{\textup{75,000}}{\textup{25,000}}

= 3 quarters = 9 months

therefore,

the total payback period for project B = 1 year + 9 months = 21 months

hence, Project A should be recommended as the payback period for project A is less i.e 18 months

5 0
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vovikov84 [41]

When employees at southwest airlines donate volunteer hours to Ronald Mcdonald houses throughout the United states, this is an example of a <u>CSR</u> program.

<h3>What is CSR?</h3>

CSR is abbreviation for corporate social responsibility and it can be defined as a business organization's (company's) obligation to act in a manner that benefits and adds significant value to the society and the people living in the environment where it operates, and usually as it conduct its business operations.

Basically, corporate social responsibility (CSR) is typically focused on improving the society through any positive and beneficial means possible.

In this context, we can reasonably infer and logically deduce that when employees at southwest airlines donate volunteer hours to Ronald Mcdonald houses throughout the United states of America, this is an example of a corporate social responsibility (CSR) program.

Read more on corporate social responsibility (CSR) here: brainly.com/question/1373962

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3 0
1 year ago
To be considered a qualified mortgage, the loan must have specific features and meet designated underwriting requirements. Based
kvv77 [185]

Answer:

The correct answer is d. the loan does not require verification of underwriting information from third party records.

Explanation:

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3 0
3 years ago
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