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
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%

You might be interested in
When other salespeople believe that a sales manager has valuable knowledge or skills in a given area, the sales manager is able
netineya [11]

Answer:

The correct answer is: expert power.

Explanation:

Expert power is power derived from the belief of workers that a manager or some other member of an organization has a high level of knowledge or some sort of unusual skills not acquired or displayed by other employees or coworkers of the company. This provides the skilled worker a certain influence at the moment of deciding workers of the same hierarchy.

6 0
3 years ago
The internet corporation for assigned names and numbers (icann) uses companies called _____ to handle the business of registerin
Over [174]
The internet corporation for assigned names and numbers uses companies named accredited domain name registrars to handle the business of registering domain names. In addition, cloud computing denotes to a computing setting where software and storage are delivered as an internet service and get into with a web browser.
4 0
3 years ago
Circumstances) People, constraints, and consumption are some of the key factors that will impact on your critical thinking and s
zimovet [89]

Answer:

True

Explanation:

Critical thinking is the thinking that deals in analyzing the facts so that the judgment could be created. It involves various things like rationality, non-biased, proof-based on facts provided, etc

Here the factors that directly impact the critical thinking are people, constraints and the consumption this results in shaping your goals and objectives you made

hence, the given statement is true

8 0
3 years ago
Your company has spent $290,000 on research to develop a new computer game. The firm is planning to spend $49,000 on a machine t
Maslowich

Answer:

$132,745.82

Explanation:

required investment = $290,000 + $49,000 + $5,900 + $59,000 =  $403,900

depreciable amount = $49,000 + $5,900 = $54,900

Research and development costs are expensed, they cannot be capitalized. Increase in net working capital cannot be capitalized either.

MACRS depreciation expense for year 1 under 8 year class life = 14.29%

depreciation expense year 1 = $54,900 x 14.29% = $7,845.21

net cash flow year 1 = [($390,000 - $190,000 - $7,845.21) x (1 - 35%)] + $7,845.21 = ($192,154.79 x 0.65) + $7,845.21 = $124,900.61 + $7,845.21 = $132,745.82

5 0
3 years ago
A teacher has decided to take her fifth grade class to a play. The manager of the theater agreed to discount the regular ​$35 pr
MArishka [77]

Answer:

40 students

Explanation:

The cost of the bus is $480

For x students, the cost of each ticket will be 35 - 0.30x

The total cost of the tickets for x students will be x(35 - 0.30x)

To find the number of students that will make the cost per student equal to $33, we solve for x:

<u>480+ x(35 - 0.30x)</u>  =35

                x

480+ x(35 - 0.30x<u>)</u>   = 35x

480 + 35x - 0.30x²   = 35x

480                            = 0.30x²

1,600                          = x²

40                               = x

The cost per student will be $35 if the number of students is 40; it will be less than $35 if the number of students is greater than 40.

8 0
3 years ago
Other questions:
  • Would you recommend that Apple raise or lower its price for the iWatch to increase​ revenue?
    6·1 answer
  • How are resources and scarcity connected?
    8·1 answer
  • Which financial statement would best display a company's plant, property, and equipmnt used everyday
    5·1 answer
  • A company that creates education products is planning to create a suite of books to help customers prepare for high-stakes tests
    15·1 answer
  • Vincent is interested in increasing his earning potential upon completing his internship at a major accounting firm. Which optio
    5·1 answer
  • Llano’s stock is currently selling for $50.00. The expected dividend one year from now is $1.50, and the dividend growth rate is
    8·1 answer
  • Lin Co., a distributor of machinery, bought a machine from the manufacturer in November for $10,000. On December 30, Lin sold th
    14·1 answer
  • Onslow Co. purchases a used machine for $192,000 cash on January 2 and readies it for use the next day at an $8,000 cost. On Jan
    13·1 answer
  • Q: Research topic: CORONA-19: Asian stock markets and vaccine hopes
    6·1 answer
  • While driving home for the holidays, you can’t seem to get Little’s Law out of your mind. You note that your average speed of tr
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!