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77julia77 [94]
3 years ago
12

JKL has 3 million shares of common stock outstanding and 80,000 bonds outstanding. The bonds pay semi-annual coupons at an annua

l rate of 9.05%, have 6 years to maturity and a face value of $1,000 each. The common stock currently sells for $30 a share and has a beta of 1. The bonds sell for 94% of face value and have a 10.42% yield to maturity. The market risk premium is 5.5%, T-bills are yielding 5% and the tax rate is 30%. What is the firm's capital structure weight for equity
Business
1 answer:
mylen [45]3 years ago
8 0

Answer:

54.48%

Explanation:

The computation of the weight of equity is given below;

But before that we need to do the following calculations

Total Equity

= 3 million shares × $30

= $90 million

The Value of Debt,

Total Debt = 80,000 (1,000)(0.94)

= $75.2 million

Now the weight of equity is

= $90 million ÷ ($90 million + $75.2 million)

= 54.48%

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Which company is most exposed to the ups and downs of the aircraft engine industry? a) General Electric b) MTU Aero Engines c) U
Mrac [35]
I think it’s b but I can’t garauntee I’m sorry
6 0
3 years ago
A company has employed two workers A and B whose productivities are 20units and 15units respectively. The wage for A is k12 whil
Leni [432]

Answer:

no

Explanation:

In order to achieve optimal employment level, the ratio of productivity between employees must be equal to the ratio between their wages, e.g. an employee who is 25% more productive, should earn 25% more.

In this case, the productive ratio is 15:20 or 3:4, while the wage ratio is 8:12 or 2:3. Since the wage ratio is lower than the productivity ratio (2:3 < 3:4), the two employees are not optimally employed.

3 0
3 years ago
Assume a firm has a beta of 1.2. All else held constant, the cost of equity for this firm will increase if the: beta decreases.
eduard

Answer:

Risk-free rate decreases

Explanation:

The CAPM formula for calculating cost of equity requires one to know the value of 3 pieces of information only:

1. the market rate of return,

2. the beta value

3. the risk-free rate.

Ra = Rrf + [Ba∗(Rm−Rrf)]

where:

Ra=Cost of Equity

Rrf = Risk-Free Rate

Ba = Beta

Rm=Market Rate of Return

​From the formula

Ra = Rrf + [1.2∗(Rm−Rrf)]

Ra = Rrf + 1.2Rm - 1.2Rrf

From Ra = 1.2Rm -0.2Rrf

From the expression above, it can be seen that the lower the value of Rrf (Risk-Free rate), the higher the value of Ra.

4 0
3 years ago
Jessica Marshall, the CEO of ABD Oil Drilling Inc., decides to set aside an amount of $10,000 from the company's annual profits
Travka [436]

Answer:

corporate philanthropy.

Explanation:

Corporate philanthropy refers to an act done by a corporation or business organization with a motive to promote the welfare of a society by charitable donations of funds

Since in the question it is mentioned that the Jessica already aside the amount of $10,000 for the nonprofit organization and already it meets the requirement of government to contribute 4% of the company revenue for the social benefits

So this given situation represents the corporate philanthropy.

3 0
3 years ago
Suppose your company needs to raise $19 million and you want to issue 25-year bonds for this purpose. Assume the required return
Lady_Fox [76]

Answer:

normal bonds: $19,000,000 = 19,000 bonds

zero coupon bond: $24,366,207.91 dollars = 24,367 bonds

Explanation:

For the zero coupon bond, we will need to calculate the value which discounted at 10% per year during 25 years equals 19,000,000:

Principal \: (1+ r)^{time} = Amount

Principal 19,000,000.00

time 25.00

rate 0.01000

19000000 \: (1+ 0.01)^{25} = Amount

Amount 24,366,207.91

For the normal bonds, the company will issue the bonds at par the bond rate matches the market rate. It will issue for a face value of 19,000,000

8 0
3 years ago
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