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Masteriza [31]
4 years ago
15

Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden is considering borrowing fund

s at a cost of 6% and using these funds to repurchase existing shares of stock. Assume perfect capital markets. If Taggart borrows until they achieved a debt -to-equity ratio of 50%, then Rearden's levered cost of equity would be closest to:A) 10.0%B) 12.0%C) 15.0%D) 16.0%
Business
1 answer:
Alexxandr [17]4 years ago
4 0

Answer:

Option (C) is correct.

Explanation:

We have to use MM proposition that cost of equity will change itself in such a manner so that it can take care of its debt.

Cost of equity:

= WACC of all equity firm + (WACC of all equity - Cost of debt ) × (Debt -to-equity ratio)

At the beginning, when there was no debt,

WACC = cost of equity = 12 %

Levered cost of equity:

= 12% + ( 12% - 6%) × 0.5

= 15%

Therefore, Rearden's levered cost of equity would be closest to 15%.

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Q 5.7: Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company return
Ghella [55]

Answer:

Ans. The amount of the check is $784

Explanation:

Hi, from the initial balance of $1,000, we have to substract the returned merchandise, which was $200, therefore, Long Company owes Hale Company, $800 if Long Company pays within day 11th to 30th of the day of purchase. Since Long Company plans to pay within the first 10 days from the date of purchase, they would be granted a 2% discount on their remaining balance, therefore, the amount that Long Company has to write the check for is:

Check=Remaining Balance*(1-Discount)

It should look like this

Check=800*(1-0.02)=784

So, Long would have to write a check for $784, that is if it pays within the first 10 days from the date of purchase.

Best of luck.

8 0
3 years ago
"The Bank of Israel lowered its benchmark lending rate by half a percentage point, the fourth cut in seven weeks, as the global
cupoosta [38]

Hi there.

None of the answers here fit in so i would answer you to the best of my knowledge.

Answer:

Increase; increasing

Explanation:

In reducing the lending rate of banks by the Bank of Israel, bank reserves will increase as the bank's reserves as lesser amounts will be lent out. Also, consumption will increase as a result of this lowered lending rate which in itself is a goal of lending rate reduction.

By reducing the lending rate also, the thought of inflation has been taken care of as well. This helps to keep the economy financially stable as much as possible during the global financial turmoil

Cheers

3 0
4 years ago
.
8090 [49]

Answer: B

Explanation:

7 0
4 years ago
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The appropriate response is Evasion graph. A strategy created before executing a battle mission, that is planned to enhance a potential dodger's odds of effective avoidance and recuperation by furnishing recuperation powers with an extra wellspring of data that can build the consistency of the Dodger's activities and development. Additionally called EPA.
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An Indian Food Truck is considering a new tandoori oven in which to bake naan. Tandoor A can handle 22 naan in an hour. The fixe
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