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2 years ago

Horford Co. has no debt. Its cost of capital is 8.9 percent. Suppose the company

Business

1 answer:

blsea [12.9K]2 years ago

4 0

Answer:

A. 12.1%

B. 8.9%

Explanation:

a. Calculation for What is the company's new cost of equity

Using this formula

New cost of equity=Cost of capital+[(Cost of capital- Debt interest rate ) *(Debt-equity ratio)*(1)]

Let plug in the formula

New cost of equity=[0.089+[(0.089-0.057)*(1)*1]

New cost of equity=[0.089+0.032*(1)*1]

New cost of equity=[0.121*(1)*1]

New cost of equity=0.121*100

New cost of equity=12.1%

Therefore the company's new cost of equity will be 12.1%

b. Calculation for What is its new WACC

Particular Weight Cost Weighted cost

Equity 0.5000 *12.1% = 0.0605

Debt 0.5000 * 5.7% =0.0285

WACC =0.089*100

WACC =8.9%

(0.0605+0.0285)

Therefore the new WACC will be 8.9%

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The average worker in China makes $5,000/year. Wages are keeping up with GDP growth of 7%/year. Assuming a constant growth rate,

Rashid [163]

Answer:

it will take 20.75 year to reach amount $20000

Explanation:

It is given that average worker in China makes $5000 per year

So principal amount P = $5000

It is given that wage are keeping up with a rate of 7%

So rate of interest r = 7 %

We have to find the time in which amount will become $20000 per year

We know that total amount is given by $A=P(1+\frac{r}{100})^n$ , here n is time period and r is rate of interest

So $20000=5000(1+\frac{7}{100})^n$

So $4=1.07^n$

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$log4=nlog1.07$

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n = 20.75 year

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3 years ago

Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions

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Answer:

Return on Investment (ROI)

In terms of margin :

Division Osaka (ROI) = 21.00 %

Division Yokohama (ROI) = 18.75%

In terms of turnover :

Division Osaka (ROI) = 300%

Division Yokohama (ROI) = 225%

Residual Income

Division Osaka = $60,000

Division Yokohama = $120,000

Explanation:

Return on Investment = Divisional Profit Contribution / Assets Employed in the Division x 100

In terms of margin :

Division Osaka (ROI) = $ 210,000 / $ 1,000,000 x 100 = 21.00 %

Division Yokohama (ROI) = $ 720,000 / $ 4,000,000 x 100 = 18.75%

In terms of turnover :

Division Osaka (ROI) = $ 3,000,000 / $ 1,000,000 x 100 = 300%

Division Yokohama (ROI) = $ 9,000,000 / $ 4,000,000 x 100 = 225%

Residual Income = Controllable Profit - Cost of Capital Charge on Investment Controllable by Divisional Manager

Division Osaka = $ 210,000 - $ 1,000,000 x 15% = $60,000

Division Yokohama = $ 720,000 - $ 4,000,000 x 15% = $120,000

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Answer:

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3 years ago

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