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Daniel [21]
3 years ago
8

Marble Construction estimates that its WACC is 10% if equity comes from retained earnings. However, if the company issues new st

ock to raise new equity, it estimates that its WACC will rise to 10.8%. The company believes that it will exhaust its retained earnings at $2,500,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects: Project Size IRR A $650,000 14.0% B 1,050,000 13.5 C 1,000,000 11.2 D 1,200,000 11.0 E 500,000 10.7 F 650,000 10.3 G 700,000 10.2 Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted
Business
1 answer:
IceJOKER [234]3 years ago
6 0

Answer:

Project Size IRR

A $650,000 14.0%

B 1,050,000 13.5

C 1,000,000 11.2

D 1,200,000 11.0

Explanation:

Based on the information given the set of projects that should be accepted should be the project that has higher Internal rate of return (IRR) than the Weighted average cost of capital (WACC) percentage of 10.8% . Hence, the set of projects that should be accepted are: Project A,B,C,D

Project Size IRR

A $650,000 14.0%

B 1,050,000 13.5

C 1,000,000 11.2

D 1,200,000 11.0

Total $3,900,000

Based on the above we can see that Project A,B,C,D has a total of $3,900,000 which is higher than the retained earnings amount of $2,500,000.

Therefore the set of projects that should be accepted should be Project A,B,C,D

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Johnny Come Lately Computers (JCMC) has 20,000 bonds outstanding, selling at 98 percent of par; 300,000 shares of stock outstand
Marrrta [24]

Answer:

61.82 %

Explanation:

For WACC calculation, we consider the Market Weight of Common Stock.

Market Weight of Common Stock = Market Value of Common Stock ÷ Total Market Value of Funding

                                                         = (300,000 × $32.71) ÷ (20,000 × 98 + 300,000 × $32.71 + 50,000 × $82)

                                                         = 61.82 %

Thus the weight of Common Stock will be 61.82 %

6 0
3 years ago
XYZ Equipment, a firm that produces manufacturing equipment for various industries, experiences an influx of new sales employees
Ket [755]

Answer:

As part of the process, the HR department's first step should be to identify which sales representatives need technical training. In the instructional design process, the first and perhaps the most important step is to analyze the requirements. In this case, XYZ equipment firm is facing an issue of poor employees performance after an influx of new sales employees. To solve the issue, HR department has implemented a training program, so the first step of the process would be to identify the sales employees who are in need of technical training and are performing poorly. Because not all sales employees would require the technical training only those who are performing poorly.

6 0
3 years ago
If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes
Viefleur [7K]

Answer:

C) the industry would more closely approximate pure competition

Explanation:

A monopolistically competitive industry is one with different firms selling similar products that are slightly differentiated. It is very easy for firms to enter into industries that are monopolistically competitive. They also have the autonomy to increase their prices.

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes they would then resemble a pure competition because they would all be selling identical products which would result in little or no competition.

5 0
3 years ago
If there is an increase in market demand in a perfectly competitive market, then in the short run
katovenus [111]

Answer:

The correct answer is option d.

Explanation:

An increase in the market demand will cause the market demand curve to move to the right. This rightward shift in the demand curve will lead to an increase in the market price.

This increase in market price will cause the individual demand curves to move upwards. As the price increases, the profits earned by the firms will increase as well.

Profit to a firm is the difference between its total revenue and total cost, as the price increases, revenue will increase and cost will remain the same. This will cause profits to increase.

7 0
4 years ago
Commercial banks, savings and loan associations, and credit unions Multiple Choice
Phantasy [73]

Answer:

The correct answer is letter "D": accept deposits and make loans.

Explanation:

Commercial banks are the most common financial institutions there are allowing people have access to<em> deposits, loans, Certificate of Deposits (CDs), mortgages, credit cards, </em>and <em>mutual funds </em>among a wide variety of investment and credit instruments.  

At a lower level, savings and loan associations and credit unions offer deposits and loans but the first ones share the money pooled among its members who share profits and credit unions are non-profit entities mainly formed by employees of the same organization.

7 0
3 years ago
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