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valkas [14]
3 years ago
8

Suppose a firm has 35 million shares of common stock outstanding at a price of $15 per share. The firm also has 200,000 bonds ou

tstanding with a current price of $905.4. The outstanding bonds have yield to maturity 9.4%. The firm's common stock beta is 1.5 and the corporate tax rate is 39%. The expected market return is 14% and the T-bill rate is 3%. What is the WACC for this firm
Business
1 answer:
Luda [366]3 years ago
6 0

Answer:

16%

Explanation:

The computation of the WACC is given below:

But before that following calculation should be done

Cost of equity

= Risk free rate of return + beta × (market return - risk free rate)

= 3% + 1.5 × (14% - 3%)

= 19.5%

Market value of equity = 35 million shares ×$15 = $525 million

And, the market value of debt = 200,000 × $905.4 = $181.08 million

Now the WACC is

= cost of equity × weight of equity + cost of debt × (1 - tax rate) × weight of debt

= 19.5% × ($525 ÷ 525 + 181.08) + 9.4% × (1 - 0.39) × ($181.08 ÷  525 + 181.08)

= 19.5% ×0.744 + 5.734% × 0.256

= 15.975%

= 16%

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Company X has 100 shares outstanding. It earns $1,000 per year and expects to pay all of it as dividends. If the firm expects to
Leno4ka [110]

Answer:

The stock price after the dividend payment is $100 per share

Explanation:

According to the data the Dividend per year is $1,000  and the Required Rate of Return is 10% .

Hence, in order to calculate the stock price after the dividend payment we have to use the following formula first:

Stock price = [Total Dividend amount / Required rate of return]

Stock price  = [$1,000 / 0.10]

Stock price = $10,000

Finally the Stock price after the dividend payment. = [Total Stock Value / Number of outstanding shares]

Total Stock value = $10,000

Number of outstanding shares = 100 shares

Stock price after the dividend payment = [$10,000 / 100 shares]

Stock price after the dividend payment = $100 per share

4 0
3 years ago
Rotato, a U.S. tire company, produces a set of tires at a plant in Michigan on September 16, 2019. It sells the set of tires to
anygoal [31]

Answer:

Excluded from GDP

The production of the set of tires does not included on the GDP as it is referred to as an intermediate goods which are used to produce the final product (which is the two door coupe, in this case).

Explanation:

Gross domestic Production (GDP) represent the total production of a nation within its domestic borders. Some of the items that are excluded in GDP include: sales of goods that were produced outside the domestic borders of the country, intermediate goods that are used to produce other final goods, sales of used goods, illegal sales of goods and services (black market) and transfer payments made by the government

6 0
3 years ago
Which of the following statements regarding supply chain customer service is most accurate?
IrinaVladis [17]

Answer:

d. Supply chains should consider the needs of consumers provided those needs are consistent with marketing strategies.

Explanation:

In order for supply chain customer service to be effective, it is necessary to focus on customer needs and these needs must be aligned with the company's marketing strategies.

In other words, each stage of the supply chain must operate in an integrated manner, so that each process is synergistic and so that the final consumer can receive the product at the right time, in the right quantity and in the right quality. Therefore, supply chain management will improve each step of the process, guaranteeing the quality of the processes, the reduction of time, the reduction of costs and waste and ensuring the continuous improvement of the process, which will make the product go through each channel effectively, generating value and strengthening the relationship between the company and the consumer.

5 0
4 years ago
Which form shows a business's financial performance over a reporting period?
My name is Ann [436]

Answer:

d

Explanation:

4 0
3 years ago
A company has established that the relationship between the sales price for one of its products and the quantity sold per month
notka56 [123]

Answer:

Q = 450

P = 35

Explanation:

TR = P x Q = (75 - 0.1Q) x Q = -0.1Q2 + 75Q

Then, Cost = (30Q + 1,000)

Profit: Total revenue - C

-0.1q2 + 75Q - 30q - 1,000 = -0.1q2  + 45q - 1,000

as this is a quadratic function we identify a b c:

a= -0.1 b = 45 x = -1000

the profit maximum point is at the vertex:

-b/2a = -45/ 2(-0.1) = -45/-0.1 = 450

The profit maximize at Q = 450

P = 75 - 0.1x450 = 35

3 0
3 years ago
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