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svlad2 [7]
3 years ago
5

Fama’s Llamas has a WACC of 8.95 percent. The company’s cost of equity is 10.4 percent, and its pretax cost of debt is 5.3 perce

nt. The tax rate is 21 percent. What is the company’s target debt-equity ratio?
Business
1 answer:
Oduvanchick [21]3 years ago
3 0

Answer:

0.3044

Explanation:

Data provided in the question:

WACC = 8.95%

Company’s cost of equity = 10.4%

Pretax cost of debt = 5.3%

Tax rate = 21% = 0.21

Now,

After-tax rate of debt = Pretax cost of debt × (1 - tax rate)

= 5.3% × (1 - 0.21 )

= 4.187%

Let debt be x and Equity be y

Thus,

Total = $( x + y )

also,

WACC = ∑ ( costs × weight  )

or

8.95 = ((\frac{x}{(x+y)}\times4.187) + (\frac{ y}{(x+y)}\times10.4)

8.95 (x+y) = 4.187x + 10.4y

or

8.95x + 8.95y = 4.187x + 10.4y

or

x = (10.4 - 8.95)y ÷ (8.95 - 4.187)

=0.3044y

or

\frac{x}{y}

Therefore,

Debt-equity ratio = ( debt ) ÷ ( equity  )

= x ÷ y

= 0.3044

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4 0
1 year ago
Koch traded Machine 1 for Machine 2 when the fair market value of both machines was $50,000. Koch originally purchased Machine 1
nexus9112 [7]

Answer:

The right answer is $50,000

Explanation:

Simply put, adjusted basis is the cost of an object after factors that affects the cost has being considered. These factors usually include taxes, depreciation value and any other cost incurred in getting and retaining the said object. Adjusted basis is important so as to know the right amount to sell.

Adjusted basis increases when an individual factors the cost incurred from taxes and maintenance ad it reduces when he/she factors in depreciation.

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8 0
3 years ago
If a painter tells you that he would spent $30 on a resperator (but not $31) that protects him from paint fumes that produce a 0
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Answer:

$300,000

Explanation:

Data provided in the question:

Amount the painter would like to spend on a respirator = $30

Chances of paint fume killing the painter = 0.01%

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= [ Amount spent on respirator ] ÷ [ Probability of death ]  

or

= 30 ÷ 0.01%

or

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Which graph shows the relationship between the aggregate price level and the aggregate quantity supplied over time?
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Answer:

Pharma One

The statement that indicates that KleenKare is a cash cow according to the the Boston Consulting Group (BCG) matrix is:

2. The demand for analgesic drugs in the Syrian market is expected to maintain a low-growth, high-share status.

Explanation:

A cash cow depicts the BCG matrix quadrant where there are higher returns, high market share in a low-growth market.  The cash cow requires little investment to generate high returns.  It also provides the cash for financing the other quadrants (dogs, stars, and question marks).  Basically, the BCG matrix, also known as the Growth/Share Matrix, depicts the products' growth opportunities.

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