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valkas [14]
2 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]2 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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If aggregate expenditure in an economy equals 1,000 0. 9y and full employment real gdp equals 9,000, then this economy has:_____
LenKa [72]

The economy would be in equilibrium as  AE = 1000 + 0.9Y

Y = 1000 + 0.9Y

Y - 0.9Y = 1000

(1-0.9) Y = 1000

Y = 1000/0.1

Y = $10000

AE = 10,000

<h3>What does total spending actually mean?</h3>

Aggregate expenditure, a macroeconomic statistic, is used to measure and evaluate the total amount of economic activity or output within a country. A nation's total outlays over a given time period are measured by aggregate expenditure, just as the gross domestic product (GDP) and national income.

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6 0
1 year ago
Which of the following is most likely true about direct and digital marketing? Group of answer choices They make it increasingly
lord [1]

Answer:

They provide buyers with anytime, anywhere access to products.

Explanation:

Direct digital marketing is the type of marketing that is done exclusively through digital channels such as email and the internet. It is becoming the more convinient way of marketing and is used by most businesses and even replaces traditional marketing in some cases.

Email marketing involves promotion of products through targeted emails to selected customer segments.

Marketing on the internet involves advert placement on various internet channels such as social media and search engines.

A minor advantage of digital marketing is that it is available at every time. So the customer can access information on products at any time of the day.

7 0
3 years ago
Read 2 more answers
In some states, real estate agents are legally required to A. hire home inspectors to perform pre-sale inspections. B. appraise
Doss [256]
D.back up the claims their clients make about home conditions
6 0
3 years ago
With an inflation rate of 9 percent, prices would double in how many years?
Julli [10]

Answer:

8 years

Explanation:

the rule of 72 calculates how long it takes for an amount to double given interest rate

72 / 9% = 8 years

7 0
3 years ago
Inga invested part of her $6000 savings in common stock and the rest in rare stamps. At the end of the year, she realized a gain
kherson [118]

Answer:

The amount Inga invested in stamps is $2,500.

Explanation:

Let x represents the amount invested in common stock. Therefore, we have:

Amount invested in common stock = x

Amount invested in stamps = 6000 - x

Rc = Rate of gain from common stock = 9%, or 0.09

Rs = Rate of gain from common stock = 12%, or 0.12

Amount of saving now = $6615

Therefore, we have

Amount of saving now = (x * (1 + Rc)) + ((6000 - x) * (1 + Rs)) ………….. (1)

Substituting all the relevant values into equation (1) and then solve for x, we have:

6615= (x * (1 + 0.09)) + ((6000 - x) * (1 + 0.12))

6615 = (x * 1.09) + ((6000 - x) * 1.12)

6615 = 1.09x + (6720 - 1.12x)

6615 = 1.09x + 6720 - 1.12x

6615 - 6720 = 1.09x - 1.12x

-105 = -0.03x

x = -105/-0.03

x = 3,500

Therefore, we have:

Amount invested in stamps = 6000 - x = $6,000 - $3,500 = $2,500

Therefore, the amount Inga invested in stamps is $2,500.

5 0
3 years ago
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