Productivity, hope this helps:)
If the several operational divisions were in significantly different risk classifications, distinct cost of capital estimates should be used for each division; using a single, overall cost of capital would be incorrect.
<h3>Why is it essential for businesses to calculate their cost of capital?</h3>
In economics and accounting, the cost of capital is the price a firm pays for its assets, or from the investor's point of view, the needed rate of return on a portfolio company's existing securities. It is used to assess a company's new ventures. The cost of capital is used by business executives to determine how much money new ventures need to earn in order to cover their initial costs and turn a profit. They also use it to assess the risk of future business decisions. Investors and analysts place a high value on the cost of capital.
The common issue encountered when assessing the cost of capital for a division is that its own securities are rarely traded on the market, making it impossible to monitor the market's appraisal of the division's risk.
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Answer:
Annual depreciation= $420,000
Explanation:
Giving the following information:
The cost of an asset is $1,050,000, and its residual value is $210,000.
The estimated useful life of the asset is four years.
To calculate the depreciation expense using the double-declining balance, we need to use the following formula:
Annual depreciation= 2*[(book value)/estimated life (years)]
Annual depreciation= 2*[(1,050,000 - 210,000)/4]
Annual depreciation= $420,000
Answer:
$178,000
Explanation:
Calculation for How much debt to achieve the target debt ratio
First step is to find the Target amount of debt using this formula
Target amount of debt =Target debt percentage ×Total assets
Let plug in the formula
Target amount of debt =55%× $660,000
Target amount of debt=$363,000
Second step is to calculate for the Change in the amount of debt outstanding using this formula
Change in amount of debt outstanding = Target debt -Old debt
Let plug in the formula
Change in amount of debt outstanding =$363,00-$185,000
Change in amount of debt outstanding =$178,000
Therefore How much debt to achieve the target debt ratio will be $178,000
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