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yuradex [85]
2 years ago
15

You were hired as a consultant to the ABC Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equ

ity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of equity is 11.25%, and the tax rate is 40%. What is ABC's WACC
Business
1 answer:
TEA [102]2 years ago
5 0

Answer:

8.15%

Explanation:

The weighted average cost of capital is the sum of costs of different  sources of finance multiplied by their respective weights as shown by the formula below:

WACC=(cost of equity*weight of equity)+(cost of preferred stock*weight of preferred stock)+(after-tax cost of debt*weight of debt)

cost of equity=11.25%

weight of equity=55%

cost of preferred stock=6.00%

weight of preferred stock=10%

after-tax cost of debt=6.50%*(1-40%)=3.90%

weight of debt=35%

WACC=(11.25%*55%)+(6.00%*10%)+(3.90%*35%)

WACC=8.15%

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A__________ gap exists when a firm knows what it needs to do to meet customers' service expectations but sometimes fails to do i
astra-53 [7]

Answer:

a. delivery

Explanation:

The delivery gap is that gap which shows a difference between the company service timing and actual service timing that is given to the customer

The motive of the organization is to deliver the productions within the prescribed time so that the customers can get maximum satisfaction.  

But if the delivery is not made with the given that, the customer expectation falls which ultimately reduces the customer satisfaction towards the products delivered to them.

8 0
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Fields Company has two manufacturing departments, forming and painting. The company uses the weighted-average method of process
Roman55 [17]

Answer:

See attached file

Explanation:

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2 years ago
Description of the the target market is formed in the___ part of the business plan
Alexandra [31]

Answer:

Market analysis

Explanation:

A business plan is a document that shows the goals of a business and details the roadmap to achieve them. It has several sections, with each giving specific information about the business.

The market analysis part talks about the target clients. The sections give detailed data on the industry, including competitors, market performance, and prevailing trends. It describes customers in the target industry.

5 0
2 years ago
Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as​ follows: Direct mater
MrRa [10]

Answer:D.None of the option is correct, the correct answer is Buy; savings=$203,000

Explanation:

The firm will Incurred the total fixed overhead it decides to make.

The total cost of making 6000 units is $163*6000=$978,000

The total cost of buying is $144*6000= $864,000 and when we deduct $89,000 to be saved from fixed overhead by buying we have a total cost of( $864,000-$89,00) =775,000.

This invariably means the company will save ($978,000-$775,000) which is equal to= $203,000 by buying.

6 0
3 years ago
The stockholders' equity accounts of Bramble Corp. on January 1, 2022, were as follows.
damaskus [11]

Answer:

Bramble Corp.

1. Journal Entries:

Feb. 1 Debit Cash $27,000

Credit Common Stock $18,000

Paid in excess - Common $9,000

To record the issue of 4,500 shares of common stock at $6 per share.

Mar 20: Debit Treasury Stock $6,300

Credit Cash $6,300

To record the purchase of 900 shares of treasury stock at $7 per share.

Oct. 1: Debit Dividends: Preferred $18,900

Credit Dividends payable $18,900

To record the declaration of 7% cash dividend on preferred stock.

Nov. 1: Debit Dividends payable $18,900

Credit Cash $18,900

To record dividend paid on preferred stock.

Dec. 1: Debit Dividends: Common Stock $112,050

Credit Dividends Payable $112,050

To record the declaration of dividend.

Dec. 31 Debit Dividends payable $112,050

Credit Cash $112,050

To record the payment of dividends.

Closing Journal Entries:

Dec. 31 Debit Income summary $252,000

Credit Retained Earnings $252,000

To close net income to retained earnings.

Debit Retained Earnings $130,950

Credit Dividends $18,900

Credit Dividends - Common $112,050

To close dividends to retained earnings.

2. Stockholders' Equity Section of the Balance Sheet at December 31, 2017:

Preferred Stock (7%, $100 par noncumulative, 4,500 shares authorized)

Issued and outstanding, 2,700 shares = $270,000

Common Stock ($4 stated value, 270,000 shares authorized)

Issued 229,500 shares at $4 = $918,000

Paid-in Capital In Excess of Par Value-Preferred Stock = $13,500

Paid-in Capital in Excess of Stated Value-Common Stock $441,000

Retained Earnings $740,250

Treasury Stock (5,400 common shares) ($42,300)

Total common equity       $2,070,450

Total equity = $2,340,450

3. Payout ratio:

= Total dividends/Net Income

= $130,950/$252,000

= 0.52

Earnings per share

Earnings after preferred dividends/Outstanding common stock

= $233,100/224,100

= $1.04 per share

Return on Common Stockholders' equity:

= $233,100/ $2,070,450 * 100

= 11.26%

Explanation:

a) Data

Preferred Stock (7%, $100 par noncumulative, 4,500 shares authorized)

Issued and outstanding, 2,700 shares = $270,000

Common Stock ($4 stated value, 270,000 shares authorized)

Issued 225,000 shares at $4 = $900,000

Paid-in Capital In Excess of Par Value-Preferred Stock = $13,500

Paid-in Capital in Excess of Stated Value-Common Stock $432,000

Retained Earnings $619,200

Treasury Stock (4,500 common shares) $36,000

Transaction Analysis:

Feb. 1 Cash $27,000 Common Stock, 4,500 shares $27,000

Mar 20: Treasury Stock $6,300 Cash $6,300

Oct. 1: Dividends: Preferred $18,900 Dividends payable $18,900

Nov. 1: Dividends payable $18,900 Cash $18,900

Dec. 1: Dividends: Common Stock $112,050 Dividends Payable $112,050

Dec. 31 Net Income = $252,000

Dec. 31 Dividends payable $112,050 Cash $112,050

Common Stock shares:

Beginning balance = 225,000

Treasury stock              (4,500)

Issued                            4,500

Treasury stock                (900)

Outstanding shares  224,100

Retained Earnings    $619,200

Net Income                252,000

Less Dividends:

Preferred stock            18,900

Common stock          112,050

Retained Earnings $740,250

Treasury stock (4,500 + 900) = 5,400 shares $42,300 ($36,000 + 6,300)

6 0
2 years ago
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