Why do you think most companies make use of celebrities in their marketing promotional activities?
2 answers:
You might be interested in
Answer:
a. With New Stock = 8.307%
b. With Old stock = 7.971%
Explanation:
The weighted average cost of capital (WACC) defines the cost rate that blends the capital structure cost including equity, debt, and preferred stock.
Requirement A
If it uses retained earnings as its source of common equity,
Given,
The weight of the combination of the capital structure is -
= 40% = 0.40;
= 5% = 0.05;
= 55% = 0.55
For cost of debt, we have to find cost of debt after tax, =
6.9% x (1 - 0.40) = 4.14%
Cost of preferred stock, = 6.4%
Cost of new Equity, = 11.51%
We know, the weighted average cost of capital (WACC) =
x
+
x
+
x
= (0.40 x 4.14%) + (0.05 x 6.4%) + (0.55 x 11.51%)
= 1.656% + 0.32% + 6.3305%
= 8.307%
Requirement B
If it has to issue new common stock, the weighted average cost of capital (WACC) = x
+
x
+
x
Given,
The weight of the combination of the capital structure is -
= 40% = 0.40;
= 5% = 0.05;
= 55% = 0.55
For cost of debt, we have to find cost of debt after tax, =
6.9% x (1 - 0.40) = 4.14%
Cost of preferred stock, = 6.4%
Cost of new Equity, = 10.9%
Therefore, putting the value in the equation,
WACC = (0.40 x 4.14%) + (0.05 x 6.4%) + (0.55 x 10.9%)
WACC = 1.656% + 0.32% + 5.995%
WACC = 7.971%
Answer and Explanation:
1.
The direct labor overhead rate using the direct labor hours is shown below:-
Direct labor overhead rate = Total overheads ÷ Direct labor hours
= $220,800 ÷ 1,725
= $128
b. The machine hour overhead rate using the machine hours is
= Total overhead ÷ Machine hours
= $220,800 ÷ 4,600
= $48
2.
The factory overhead costs using direct labor hour is
Particulars Automobile Valve Wheels Total
bumpers covers
Direct labor
hours 730 480 515
Overhead rate $128 $128 $128
Total $ 93,440 $61,440 $65,920 $220,800
For determining the total overhead we simply multiply the direct labor hours with overhead rate.
The factory overhead costs using machine hour is
Particulars Automobile Valve Wheels Total
bumpers covers
Machine hours 1,970 1,270 1,360
Overhead rate $48 $48 $48
Total overhead $94,560 $60,960 $65,280 $220,800
For determining the total overhead we simply multiply the machine hours with overhead rate.
