1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Mazyrski [523]
3 years ago
15

Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capita

l budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 9.0%, the firm's cost of preferred stock, rp, is 8.2% and the firm's cost of equity is 11.6% for old equity, rs, and 11.9% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity
Business
1 answer:
alexira [117]3 years ago
6 0

Answer: 9.49%

Explanation:

Formula for WACC:

WACC = (Cost of Equity * Weight of equity) + [(Cost of debt * weight of debt) * (1 - tax rate)] + (Cost of Preference share * weight of preference share).

As we are using retained earnings, this is not a new stock issue so the relevant cost of equity to use is the old one.

WACC = (11.6% * 55%) + [(9% * 40%) * (1 - 25%)] + (8.2% * 5%)

= 9.49%

You might be interested in
Suppose a food pantry received a donation and allowed volunteers to vote on how the funds were to be spent. Three options were p
Tems11 [23]

Answer:

improvements to the building,

Explanation:

Opportunity cost is the foregone advantage of not setting certain options in decision making. When a particular option is preferred over others, then benefit from the other options not selected are forfeited. The forfeited benefits represent the opportunity cost.

The value of opportunity cost is equated to the value of the next best alternative. Where there were more than two alternatives available, the next best alternative from the chosen option becomes the opportunity cost. In this case, improvement to the building was voted the second preferred option; hence it becomes the opportunity cost.

8 0
3 years ago
George offers to sell his car to Suzy for $10,000 on the coming Sunday, to which Suzy agrees. They write down the details on a p
Readme [11.4K]

Answer:

Promissory Estoppel

Explanation:

Promissory estoppel states that a person who has promised to fulfill a contract cannot go back on the promise even if consideration was yet to be given. The affected party can file suit against the party who refused to fulfill his promise and can claim damages.

Promissory estoppel was created to protect parties under contract from incurring damages due to backing off by the other party. Here, Suzy can sue George on the basis of promissory estoppel.

8 0
3 years ago
Bow, Inc., an S corp, has three equal shareholders. For the year ended Dec 31 2009, Bow had taxable income and current earnings
Andreyy89

Answer:

option (b) 100K

Explanation:

Data provided in the question:

Total number of share holders = 3

Taxable income and current earnings and profits = 300K

Distributions made during 2009 = 120K

Now,

Since the  shareholders are equal shareholders in Bow Inc,

Therefore,

The amount from Bow that should be included in each S/H's gross income will be

= ( Taxable income and current earnings and profits ) ÷ (Number of share holders)

= 300K ÷ 3

= 100K

Hence,

the answer is option (b) 100K

7 0
3 years ago
The listening gap is understood to be the difference between ________. Group of answer choices A. The speed of sound and the spe
diamong [38]

Answer: the speed at which the brain can comprehend communication and speed at which the average adult speaks

Explanation:

Listening is a primary skill that is used by most individuals to gather information.

The listening gap is understood to be the difference between the speed at which the brain can comprehend communication and speed at which the average adult speaks.

3 0
4 years ago
To exercise due care, an accountant should
Snowcat [4.5K]
The answer to this is C
4 0
4 years ago
Other questions:
  • In response to rising inflation, the Federal Reserve may sell government securities in open market operations in order to:
    5·1 answer
  • A 4.8% coupon bond with 9 years remaining until maturity is currently trading at $1087.43. Assume semi-annual coupon payments. T
    5·1 answer
  • A political organization that focuses on quid-pro-quo exchanges with voters, offering them jobs or other benefits in exchange fo
    9·1 answer
  • When Terry Doyle of CommuniCom, Inc. created smaller, more independent maintenance units, he was performing the function of:
    6·2 answers
  • Employees who report unethical behavior in their own workplace (whistleblowers) are protected by law. However, many are reluctan
    9·1 answer
  • Christopher works for Ocean Media Inc., a large corporation. His work requires him to travel extensively and, as a result, he sp
    11·1 answer
  • Which of the following are finance careers?
    6·1 answer
  • Consider a 5-year bond with a par value of $1,000 and an 9% annual coupon. If interest rates change from 9% to 5% the bond's pri
    9·1 answer
  • Supporters of free trade argue that it creates which economic benefit?
    13·2 answers
  • Heidi Ganahl, CEO and Founder of Camp Bow Wow, seems to have the ability to inspire people she works with to accept her vision a
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!