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
JulijaS [17]
3 years ago
15

Johnny Cake Ltd. has 30 million shares of stock outstanding selling at $40 per share and an issue of $40 million in 8 percent, a

nnual coupon bonds with a maturity of 13 years, selling at 96.5 percent of par ($1,000). If Johnny Cake's weighted average tax rate is 33 percent, its next dividend is expected to be $4.00 per share, and all future dividends are expected to grow at 7 percent per year, indefinitely, what is its WACC
Business
1 answer:
erma4kov [3.2K]3 years ago
4 0

Answer:

WACC = 0.16637 OR 16.637%

Explanation:

WACC or weighted average cost of capital is the cost of a firm's capital structure which can comprise of debt, preferred stock and common equity. The WACC for a firm with only debt and common equity can be calculated as follows,

WACC = wD * rD * (1-tax rate)  +  wE * rE

Where,

  • w represents the weight of each component based on market value in the capital structure
  • r represents the cost of each component
  • D and E represents debt and equity respectively

To calculate WACC, we first need to calculate the Market value an cost of equity.

The market value of equity = 30 million shares * $40 per share

MV of equity = $1200 million

The cost of equity can be found using the formula for Price today (P0) under constant growth model of DDM.

P0 = D1 / (r - g)

40 = 4 / (r - 0.07)

40 * (r - 0.07) = 4

40r - 2.8 = 4

40r = 4+2.8

r = 6.8 / 40

r = 0.17 or 17%

MV of debt = 40 million * 96.5%  => $38.6 million

Total MV of capital structure = 38.6 + 1200 = 1238.6 million

WACC = 38.6/1238.6  *  0.08  *  (1-0.33)  +  1200/1238.6  *  0.17

WACC = 0.16637 OR 16.637%

You might be interested in
Hal Gore won a $2.1 million prize for special contributions to environmental research. This prize is awarded for public achievem
ioda

Answer:

1.53 Million

Explanation:

The reason is that the Environment Protection Agency is a qualified organization and donations made to qualified organization are allowable expense under the US tax rules, so the gross income will include a net amount which is the actual amount left for Hal Gore and which is $1.53 million ($2.1 m - 0.57).

8 0
3 years ago
A __________ item is something that is purchased without much thought before the purchase.
mixas84 [53]

A convenience item is something that is purchased without much thought before the purchase.

Ads are called out if they are displayed for a short time without reaching the awareness threshold. subliminal. ---- is a subtle phenomenon that uses colors and fonts to influence how your message feels.

Customization and tailoring of service delivery to individual customer needs. The service should be less variable than the product. "Product" is a general term used to describe both goods and services.

Subliminal messages are visual or auditory stimuli imperceptible to the conscious mind, often inserted into television commercials or other media such as songs purchased.

Learn more about convenience items at

brainly.com/question/15104975

#SPJ4

6 0
2 years ago
Vaughn Company has the following securities in its investment portfolio on December 31, 2020 (all securities were purchased in 2
vlabodo [156]

Answer:

Anderson Co. 3,100 shares at $18 per share

Munter Ltd. 10,200 shares at $57 per share

King Co. 5,600 preferred stock at $42 per stock

a. Prepare the entry for the security sale on January 15, 2021.

  • Dr Cash 58,880
  •     Cr Investment in Anderson Co. stock AFS 52,200
  •     Cr Realized gain on stock AFS 6,680

b. Prepare the journal entry to record the security purchase on April 17, 2021.

  • Dr Investment in Castle's stock AFS 38,160
  •     Cr Cash 38,160

c. Compute the unrealized gains or losses.

  • unrealized gain = $40,800 (gain in Munter) - $11,200 (loss in King) - $13,960 (loss in Castle) = $15,640

d. Prepare the adjusting entry for Vaughn on December 31, 2021.

  • Dr Investment in Munter's stock 40,800
  •     Cr Investment in King's stock 11,200
  •     Cr Investment in Castle's stock 13,960
  •     Cr Unrealized gain - other comprehensive income 15,640

 

4 0
3 years ago
Donna independently owns and operates Punkin's Pies, a small business with about 30 employees. She is happy with the size of her
Nataly_w [17]

Donna independently owns and operates Punkin's Pies, a small business with about 30 employees. She is happy with the size of her business and the average profits it generates. From this scenario, Donna's business can be considered an entrepreneurial venture -  False.

<u>Explanation:</u>

A person starting a new business with limited amount of resources and plans is called an Entrepreneur.  He is the person who takes responsibilities for the risk and rewards that are associated with that business. The idea of the business must be unique and it should focus only on newer products.

A small business and an entrepreneurial ventures differs from each other although they have similar roles. A small business generally deals with a familiar and an product and services that are already established. The persons of small business usually have risks that are already known. In an entrepreneurial venture, only new products and unknown risks are present.

3 0
3 years ago
What is market penetration
nalin [4]

Answer:

the extent to which a product is recognized and bought by customers in a particular market.

4 0
3 years ago
Other questions:
  • Oliver's company is planning the launch of their hybrid cars. The company has included "never-before-seen product benefits in th
    6·1 answer
  • S&amp;L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2018,
    10·1 answer
  • A married couple purchased their residence 5 years ago for $500,000. For 3 of the last 5 years, they rented out the property for
    8·1 answer
  • A ferryboat queuing lane holds 40 vehicles. If vehicles are processed (tolls collected) at a uniform rate of 5 veh/min and proce
    14·1 answer
  • Merchandise with a sales price of $9,300 is sold on account with terms 2/10, n/30. The journal entry to record the sale would in
    7·2 answers
  • QUESTION 22 You purchase one IBM July 125 call contract for a premium of $5. You hold the option until the expiration date, when
    8·1 answer
  • Type the correct answer in the box. Spell all words correctly. Which term describes a list of all ledger accounts that businesse
    5·2 answers
  • Has Toyota done the right thing by manufacturing a car brand for everyone? Why or why not?
    7·1 answer
  • The advantage to savers and investors of receiving compound interest rather than simple interest is that future values are large
    8·1 answer
  • Your parents have made you two offers. The first offer includes annual gifts of $4,000, $4,500, and $5,200 at the end of each of
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!