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andrew11 [14]
3 years ago
11

You are given the following information concerning Around Town Tours:Debt: 7,500, 6.8 percent coupon bonds outstanding, with 11

years to maturity and a quoted price of 97.9. These bonds pay interest semiannually.Common stock: 284,000 shares of common stock selling for $68 per share. The stock has a beta of 1.04 and will pay a dividend of $2.62 next year. The dividend is expected to grow by 2.5 percent per year indefinitely.Preferred stock: 9,000 shares of $8 preferred stock selling at $88 per share.Market: 14.6 percent expected return, 4.1 percent risk-free rate Company: 34 percent tax rate.Calculate the WACC for this firm.
Business
1 answer:
gtnhenbr [62]3 years ago
7 0

Answer:

9.0%

Explanation:

Calculation to determine the WACC for this firm

First step

Common stock=284,000 × $68

Common stock= $19,312,000

Second step is to calculate the Preferred stock

Preferred stock=9,000 × $88

Preferred stock= $792,000

Debt= 7,500 × .979 × $1,000

Debt = $7,342,500

Value = $19,312,000 + 792,000 + $7,342,500

Value= $27,446,500

Second step

RE = .041 + 1.04(.146-.041)

RE= .1502

RE = ($2.62 /$68) + .025

RE= .0635

Average RE = (.1502+ .0635)/2

Average RE = .1069

RP = $8/$88

RP = .0909

Fourth step

$979 = [(.068 × $1,000) / 2] × ({1- 1 / [1 + (r/ 2)]22} / (r / 2)) + $1,000 / [1 + (r / 2)]22

r = 7.08 %

Now let calculate the WACC

WACC = ($19,312,000/$27,446,500)(.1069) + ($792,000/$27,446,500)(.0909) + ($7,342,500/$27,446,500)(.0708)(1 -.34)

WACC= .090*100

WACC=9.0 %

Therefore the WACC for this firm is 9.0%

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8 0
3 years ago
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Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales $ 315,000 Beginning m
prohojiy [21]

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Q=1000

Sales= $ 315,000

Beginning merchandise inventory= $21,000

Purchases= $210,000

Ending merchandise inventory= $10,500

Fixed selling expense= $ ?

Fixed administrative expense= $12,600

Variable selling expense= $15,750

Variable administrative expense= $ ?

Contribution margin= $63,000

Net operating income= $18,900

First, we have to calculate the variable administrative expense:

Contribution margin= sales - cost of goods sold - variable selling expense - variable administrative expense

63000= 315000 - (beginning inventory + purchase - ending inventory) - 15750 - variable administrative expense

variable administrative expense= 315000 - (21000+210000-10500)-15750-63000

variable administrative expense= $15750

Now, we can calculate the fixed selling expense:

Net operating income= contribution margin - fixed selling expense - fixed administrative expense

18900= 63000 - fixed selling expense - 12600

fixed selling expense= 63000-12600-18900

fixed selling expense= 31500

A)Sales= 315,000

Variable costs:

Cost of good sold= 220,500

Variable selling expense= 15,750

Variable administrative expense= 15,750

Total variable cost= 252,000

Contribution margin=$63000

Fixed costs:

Fixed selling expense= 31,500

Fixed administrative expense= 12,600

Total fixed cost= $44,100

Net profit= $18,900

B) Revenue= 315,000

COGS= 220,500 (-)

Gross porfit= 94500

Selling expense= (15750+31500)= 47,250

Administrative expense= (15750+12600)= 28,350

EBITDA= 18,900

C) Selling price per unit= 315,000/1000= $315

D) Variable cost per unit= total variable cost/q= 252000/1000= $252

E) Contribution margin per unit= 63000/1000= $63

F) The contribution format income statement, because you can easily analyze the effect of each unit in the cost structure and net income.

7 0
3 years ago
Journal Entry
Contact [7]

Answer:

Explanation:

unearned rent         6000 (debit)

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to record 2 months of realized rent revenue

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On August 1, 2018, Kira purchased 100 shares of ITC stock for $5,000. There were no subsequent adjustments to her basis. On Augu
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Answer:

b. Short-term loss of $700 and a long-term gain of $900.

Explanation:

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August 1, 2019, sold 50 shares at $36, resulting in a short term capital loss of ($700)

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If you own a stock for 1 year or less, any gain/loss will be considered short term. If you own a stock for more than 1 year, any gain/loss will be considered long term.

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Lelu [443]

Answer: perform in-between meeting tasks(A)

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A in PDCA stands for Act and it means to take action based on what one has learned in the study. In a case whereby the change does not work, own should go through the cycle again using a different plan.

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The "act" part of the PDCA cycle is used to perform in-between meeting tasks.

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