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PSYCHO15rus [73]
3 years ago
7

Cameron Corp. has a target capital structure of 40% debt and 60% equity. The company's tax rate is 30% and the yield to maturity

on their outstanding bonds is 12%. If their weighted average cost of capital is 9.6%, what is the company's cost of common equity
Business
1 answer:
Snezhnost [94]3 years ago
6 0

Answer:

rE = 0.104 or 10.4%

Explanation:

The WACC or weighted average cost of capital is the cost of a firm's capital structure. The capital structure can consist of one or more of the following components namely debt, preferred stock and common equity. The WACC is calculated as follows,

WACC = wD * rD * (1 - tax rate)  +  wP * rP  +  wE * rE

Where,

  • w represents the weight of each component
  • r represents the cost of each component
  • D, P and E represents debt, preferred stock and common equity
  • rD * (1 - tax rate) is the after tax cost of debt

plugging in the available values for wD, wE, tax rate, rD and WACC in the formula above, we can calculate the cost of common equity to be,

0.096  =  0.4 * 0.12 * (1 - 0.3)  +  0.6 * rE

0.096 = 0.0336 + 0.6 * rE

0.096 - 0.0336 = 0.6 * rE

0.0624 / 0.6 = rE

rE = 0.104 or 10.4%

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You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in t
Anuta_ua [19.1K]

Answer:

Debt ratio

94.16%

5.84%

Equity multiplier

17.13%

1.06%

Explanation:

The debt ratio can be calculated as follows

Lots of debt incorporation= total liability/total assets.

= 32.25/34.25

= 0.9416×100

= 94.16%

Lots of equity incorporation= 2.00/34.25

= 0.05839 × 100

= 5.84%

The eqiuty multiplier can be calculated as follows

Lots of debt incorporation= equity/multiplier

= 34.25/2.00

= 17.13%

Lots of equity incorporation= equity/multiplier

= 34.25/32.25

= 1.06%

5 0
3 years ago
A materials requisition slip showed that direct materials requested were $36000 and indirect materials requested were $6000. The
Svetlanka [38]

Answer:

The entry to record the transfer of materials from the storeroom is

Debit Work in process                                 $ 36,000

Debit Factory overhead control                  $   6,000

Credit Material Account                               $ 42,000

The material is accounted in material stock account when purchase. Latter if material is used directly it is taken in work in process account. Indirect material is accounted in FOH account.

5 0
3 years ago
Activity-based costing (ABC) systems ________. A. Unselected have the same cost allocation system as plantwide and departmental
atroni [7]

Answer:

D. have separate cost allocation rates for each activity identified by the company CORRECT

There will be activity cost pool which, will be distribute among the product using different cost driver like machien hours, direct labor hours or other.

Explanation:

A. have the same cost allocation system as plantwide and departmental cost allocation systems

NO If it was, then it would not have a different name

B. have no cost allocation rates for each activity identified by the company

If we don't have rates to distrubte cost then, the allocation will be arbitrary

C. have combined cost allocation rates for each activity identified by the company

each should have different base cost driver if not, then they aren't different and should be combined.

4 0
4 years ago
Creating and providing improved working conditions has created a number of emerging careers.
gizmo_the_mogwai [7]

Answer:

true

Explanation:

because if you improve the way thing look and the way thing work people will find working there amusing.

6 0
3 years ago
To measure the trends of the market area, the appraiser must ask questions about ______________________.
klemol [59]

To measure the trends of the market area, the appraiser must ask questions about supply and demand.

In economics, the relationship between the quantity of a good or service that producers want to sell at different prices and the quantity that consumers want to buy is known as supply and demand.

It serves as the primary model for determining prices in economic theory. The interaction of supply and demand in a market determines the price of a good.

The final price is known as the equilibrium price and signifies a compromise between the good's producers and customers. When a market is in equilibrium, the amount of a good that producers supply and consumers desire are equal.

The price mechanism in a free market equalizes supply and demand. If consumers want to buy more of a product than is offered at the current price, they will tend to bid the price up.

Learn more about supply and demand here:

brainly.com/question/14741584

#SPJ4

6 0
2 years ago
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