Which quote best represents a person performing a cost-benefit analysis

A company has $105 million in outstanding bonds, and 10 million shares of stock currently trading at $34 per share.The bonds pay

Aloiza [94]

Answer

Ke = Rf + β(Rm – Rf)

Ke = 3 + 1.2(6)

Ke = 10.2%

Kd = 7%

WACC = Ke(E/V) + Kd(D/V)(1-T)

WACC = 10.2($340,000,000/$445,000,000) + 7($105,000,000/$445,000,000)(1-0.4)

WACC = 7.79 + 0.99

WACC = 8.78%

Market value of the company: $

Market value of equity(10,000,000 x $34) 340,000,000

Market value of bonds 105,000,000

Market value of the firm 445,000,000

Explanation:

First and foremost, we need to calculate cost of equity using CAPM formula as shown above. In this case, Rf = Risk free rate, β = Beta and market risk premium = Rm - Rf.

We also need to calculate market value of the company, which is the aggregate of market value of equity and market value of bond.

Then WACC is calculated as cost of equity and proportion of equity in the capital structure and after-tax cost of bond and proportion of bond in the capital structure.

3 0

4 years ago

Legal ownership in one country does not necessarily mean ownership in other countries

Nonamiya [84]

The statement above is TRUE.
In common law countries, ownership of an intellectual property is established by prior use while in code law countries ownership is established by the registration of that property. Which means that legal ownership in one country does not necessarily mean ownership in other countries.

7 0

3 years ago

Issued a cheque of rs. 39000 to Saurya stores in full settlement. <br>journal entry

Semmy [17]

Answer:

When issuing a check to a creditor as is being done here, you need to debit the creditors account (Accounts Payable) to show that you are paying off the debt.

You also need to credit cash because a credit will show that cash was used to pay for something and so has reduced.

Date Account Title Debit Credit

XX-XX-XXX Accounts Payable - Saurya Stores Rs. 39,000

Cash Rs. 39,000

4 0

3 years ago

A firm's dividends have grown over the last several years. 3 years ago the firm paid a dividend of $1. Yesterday it paid a divid

podryga [215]

Answer:

The average annual growth rate of dividends for this firm is 90.05%

Explanation:

In order to calculate the average annual growth rate of dividends for this firm we would to have to use the following formula:

A=P(1+r/100)^n

where

A=future value

P=present value

r=rate of interest

n=time period.

7=1*(1+r/100)^3

(7/1)^(1/3)=(1+r/100)

(1+r/100)=1.9005

r=(1.9005-1)*100

=90.05%(Approx).

The average annual growth rate of dividends for this firm is 90.05%

4 0

3 years ago

Which of the following accounts will give you the least Access to your money A.

Greeley [361]

<span>B is the correct answer. Certificate of deposit is the certificate that you get when you deposit money for a specified time. You can't touch the money before the time you specified when you decided to deposit the money. You can withdraw the money, paying a price, a penalty for early withdrawal. That depends on the bank terms. Other options given on the question, are easily accessed by the owner.</span>

8 0

4 years ago

Which quote best represents a person performing a cost-benefit analysis​

Which quote best represents a person performing a cost-benefit analysis