1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
il63 [147K]
3 years ago
15

Phillips Equipment has 6,500 bonds outstanding that are selling at 96.5 percent of par. Bonds with similar characteristics are y

ielding 6.7 percent, pretax. The company also has 48,000 shares of 5.5 percent preferred stock and 75,000 shares of common stock outstanding. The preferred stock sells for $64 a share. The common stock has a beta of 1.32 and sells for $41 a share. The preferred stock has a stated value of $100. The U.S. Treasury bill is yielding 2.2 percent and the return on the market is 10.6 percent. The corporate tax rate is 21 percent. What is the weighted average cost of capital?
9.30 percent

8.09 percent

10.18 percent

8.64 percent

Please show work, thank you!
Business
1 answer:
Keith_Richards [23]3 years ago
4 0

Answer:

Ke = Rf  + β(Rm – Rf)

ke = 2.2 +  1.32 (10.6 - 2.2)

Ke = 2.2 + 1.32(8.4)

ke = 2.2 + 11.088

ke = 13.288%

kp = D/Po

kp = $5.50/$64

Kp = 0.0859375 = 8.59375%

Kd = 6.7%

Kd after tax = 6.7(1-0.21)  = 5.293

WACC = Ke(E/V) + kp(P/V) Kd(D/V)(1-T)

WACC = 13.288(3,075,000/12,419,500) + 8.59375(3,072,000/12,419500) + 5.293(6,272,500/12,419,500)

WACC = 3.29 + 2.126 + 2.6732

WACC  = 8.09%

The correct answer is B

Market value of the company:                                       $

Market value of equity                 = 75,000 x $41 = 3,075,000

Market value of preferred stock = 48,000 x  $64 = 3.072,000

Market value of debt                   = 6500    x  $96.5 = 6,272, 500

Market value of the company                                       12,419,500

The correct answer is B

Explanation:

In this question, we need to calculate cost of equity based on capital asset pricing model. Then, we will calculate cost of preferred stock as shown above.  Thereafter, the after-tax cost of debt will be computed as illustrated above. We also need to calculate the market value of the company. Finally, we will calculate weighted average cost of capital as computed above.

You might be interested in
Manny’s Cookies, Ltd. is an online cookie subscription business started by a 7-year old (Manny) and his father. Manny’s Cookies
lisov135 [29]

Answer:

Social Entrepreneurship

Explanation:

According to my research on different types of businesses, I can say that based on the information provided within the question Manny's Cookies is an example of Social Entrepreneurship. This term refers to a start up company that in which they develop, fund and implement different products or services for society, as well as providing solutions for society, or the environment. Which in this case the product are Manny's cookies but by donating money to charity they are helping provide solutions to many problems.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

5 0
3 years ago
Compare a market operating at a quantity lower than equilibrium with the same market operating at the equilibrium quantity. Whic
topjm [15]

Answer:

a.) the economic surplus is greater at the equilibrium quantity.

Explanation:

This is correct because at lower production levels a dead weight is created of the potential surplus that is not obtained either for producer nor consumers. At equilibrium, the maximum surplus is achieved and is allocated among producers and consumers

6 0
3 years ago
A bank provides its customers mobile applications that significantly simplify traditional banking activities. For example, a cus
il63 [147K]

Answer:

The correct answer is A. Differentiation.

Explanation:

They are marketing strategies used by companies to highlight a product about similar offers in the market.

This strategy seeks to provide the company with a competitive advantage, it is important that this strategy is directed directly to a specific segment of the market and delivers a concrete and positive message about the different product to other products in a market.

This strategy offers a small business survival opportunity when they compete in a market dominated by large companies.

It is important that the company is clear about the principle of this type of strategy, since achieving being different is not the objective, the particularity is being relevant and achieving consumer preference, that is, it is not enough to be different from the others, that difference must be followed by a benefit that the client supposes important and effective.

5 0
3 years ago
Chavez Corporation reported the following data for the month of July: Inventories: Beginning Ending Raw materials $46,000 $39,50
Archy [21]

Answer:

Cost of goods manufactured= $228,700

Explanation:

<u>To calculate the cost of goods manufactured, we need to use the following formula:</u>

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP

cost of goods manufactured= 25,500 + (46,000 + 75,500 - 39,500) + 100,500 + (68,500 - 11,800) - 36,000

cost of goods manufactured= $228,700

We deduct the indirect material from overhead because it is already incorporated into direct materials.

6 0
3 years ago
A three-month HP put option with an exercise price of $60 sells for a premium of $8. The put is in the money only if the price o
Mkey [24]

Answer:

less than $60 per share

Explanation:

A put option is the money when the exercise price is greater than the asset price, thus the put has to be less than $60

3 0
3 years ago
Read 2 more answers
Other questions:
  • A traditional buyer-seller relationship is defined as "a long-term relationship between an owner and a contractor in which the c
    5·1 answer
  • Benito spent $1837 to operate his car last year. Some of these expenses are listed on the table below:. . Operating Expenses. .
    6·2 answers
  • The amount of earnings left after taxes and other deductions are taken out is what
    11·1 answer
  • In november 2010 the labor force in siouxtown, was 14,800. there were 14,483 persons employed. the local unemployment rate:
    10·1 answer
  • A fee interest timeshare divides the ownership of a unit into separate time intervals.
    12·1 answer
  • A product cost is
    12·1 answer
  • If net operating income is $34,000, average operating assets are $204,000, and the minimum required rate of return is 15%, what
    11·1 answer
  • A heavy construction firm has been awarded a contract to build a large concrete dam. It is expected that a total of 8 years will
    9·1 answer
  • Quantitative Problem: 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and a
    15·1 answer
  • The simple interest rate is 7% per year. if james deposits 10,000 at the end of 18 months coursehero
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!