Answer: £6200
Step-by-step explanation:
Given the formula for cost of a car = 12 x monthly payment + deposit,
where monthly payment = £350 and deposit = £2000
Insert the values into the formula:
Cost of the car= 12 (£350) + £2000
Multiply 12 by £350, then add £2000
= 12 x £350 + £2000
£4200 + £2000
=£6200
Therefore, Cost of the car is £6200
12. The equation would be 6x=5x+12. X stands for the number of aerobics classes, 6x for nonmembers, 5x for members and the 12 for the membership fee
The answer for this problem: Option C.
Beta= 1.3
Debt to equity ratio= 0.4
Market rate of return= 11.6%
= 11.6/100
= 0.116
Tax rate= 32%
= 32/100
= 0.32
Risk free rate= 3.3%
= 3.3/100
= 0.033
Pretax cost of debt= 7.2%
= 7.2/100
= 0.072
The firm's WACC can be calacluated as follows
RS= 0.033+1.3(0.116-0.033)
= 0.033+1.3(0.083)
= 0.033+0.1079
= 0.1409
WACC= (1/1.4)(0.1409)+(2/1.4) (0.072)(1-0.32)
= (0.7142)(0.1409) + (1.4285)(0.072)(0.68)
= 0.1006+0.0699
= 0.1705(100)
= 17.05%
Hence the firm's WACC is 17.05%
