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Jlenok [28]
3 years ago
11

Currently, Forever Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Forever's debt currently has an 7

% yield to maturity. The risk-free rate (rRF) is 3%, and the market risk premium (rM - rRF) is 8%. Using the CAPM, Forever estimates that its cost of equity is currently 13.5%. The company has a 40% tax rate. What is Forever's current WACC
Business
1 answer:
Allisa [31]3 years ago
4 0

Answer:

WACC = 11.6%

Explanation:

<em>The weighted average cost of capital (WACC) is the average cost of all the various sources of long-term finance used by a business weighted according to the proportion which each source of finance bears to the the entire pool of fund. </em>

To calculate the weighted average cost of capital, follow the steps below:  

<em>Step 1: Calculate cost of individual source of finance </em>

Cost of Equity= 13.5%  

After-tax cost of debt:

= (1- T) × before-tax cost of debt  

= 7%× (1-0.4)= 4.2%  

<em>Step 2 : calculate the proportion or weight of the individual source of finance . (This already given) </em>

Equity = 80%  

Debt= 20%

<em>Step 3:Work out weighted average cost of capital (WACC) </em>

WACC = ( 13.5%× 80%) + ( 4.2%× 20%) = 11.64%  

WACC = 11.6%  

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Peters, Inc. produces 3 products: P1, Q2, and R3. P1 requires 400 purchase orders, Q2 requires 600 purchase orders, and R3 requi
alexdok [17]

Answer:

P1 $36,000

Q2 $54,000

B2 $90,000

Explanation:

For computing each ordering and receiving overhead assigned, first we have to calculate the price per order which is shown below:

= Total cost of purchase orders ÷ total purchase orders

where,

Total purchase orders = P1 purchase orders + Q2 purchase orders + R3 purchase orders

= 400 + 600 + 1,000

= 2,000 purchase orders

And, the Total cost of purchase orders is $180,000

Now put these values to the above formula  

So, the price would equal to

= $180,000 ÷ 2,000 orders

= $90

Now we can compute easily.

For P1 = Purchase orders × price per order

          = 400 × $90

          = $36,000

For Q2 = Purchase orders  × price per order

            = 600 × $90

            = $54,000

For R3 = Purchase orders  × price per order

           = 1,000 × $90

           = $90,000

The given options are not correct

4 0
3 years ago
The three activities in an information system that produce the information organizations use to control operations are:
mixas84 [53]

Answer:

The three activities are; Input, Processing, and Output.

Explanation:

Input, processing, and output are the three activities in an information system that produce the information an organization needs. Input captures or collects raw data from within the organization or from its external environment.

Processing converts this raw input into a meaningful form.

Output transfers the processed information to the people who will use it or to the activities for which it will be used.

7 0
3 years ago
Read 2 more answers
Suppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65, the standard deviation of quarte
Mice21 [21]

Answer:

The size of the futures position should be 64.2% of the size of the company’s exposure in a three-month hedge.

Explanation:

As given,

The standard deviation of quarterly changes in the prices of a commodity = $0.65

The standard deviation of quarterly changes in a futures price on the commodity =  $0.81

The coefficient of correlation between the two changes = 0.8

Now,

Optimal hedge ratio = 0.8×\frac{0.645}{0.81} = 0.8×0.80 = 0.6419

⇒Optimal hedge = 0.6419 ≈ 0.642 = 64.2 %

⇒The size of the futures position should be 64.2% of the size of the       company’s exposure in a three-month hedge.

5 0
3 years ago
Corporate social responsibility: Group of answer choices
Misha Larkins [42]

Answer:

Letter e is correct.<em> Extends beyond ethics to include community, environment, and human rights</em>

Explanation:

Corporate social responsibility refers to the voluntary commitment that companies have to make a contribution to the development of the society in which it operates, in addition to reducing its environmental impacts and ensuring the preservation of human rights. This is when the company implements beneficial actions that exceed those required by law.

In a globalized world, there is legal pressure from consumers, institutions, NGOs and the media to make companies not only profitable but also voluntary contributors to building a more egalitarian society.

The benefits added to companies that practice corporate social responsibility are diverse, with emphasis on improving community value and improving stakeholder satisfaction and perception.

5 0
3 years ago
Suppose Antonio and Caroline are playing a game in which both must simultaneously choose the action Left or Right. The payoff ma
Akimi4 [234]

Answer: See explanation column for answer

Explanation:

                                Caroline

                           left           Right

Anthonio   left   6,6             6,3

                  Right  4,3            5,5

The first digits in both left and right  is Anthonio's best response payoff given what Caroline chooses. Also, the second digit on both left and right is Caroline's best response payoff  based on what Anthonio chooses.

When Antonio chooses left, Caroline should choose left so as to get a payoff of 6, also when Antonio chooses right, Caroline chooses right to get a payoff of 5. therefore, there is no dominant strategy for Caroline.

The dominant strategy for Antonio occurs  

When Caroline chooses left, Antonio will have to choose left to get a payoff of 6, also when  Caroline chooses right, Antonio should choose left to get a payoff of 6. So, the dominant strategy for Antonio is to choose left.

The only dominant strategy in this game is for Antonio, to choose left.

b).  For Nash Equilibrum, Antonio will have to choose his dominant strategy, that is to choose left, which will make  Caroline is to choose left so as to get a payoff of 6. So, the Nash equilibrium is for Antonio to choose <u>left </u>and caroline chooses<u> left</u> too

8 0
3 years ago
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