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
agasfer [191]
3 years ago
12

Tobang Company is in the process of setting its target capital structure. The CFO believes the optimal debt ratio is somewhere b

etween 20 and 50 percent, and her staff has compiled the following projections for EPS and the stock price at various debt levels:
Debt Ratio Projected EPS Projected Stock Price
20% $3.20 $35.00
30% $3.45 $36.50
40% $3.75 $36.25
50% $3.50 $36.00
a. Assuming that the firm uses only debt and common equity, what is Tobang's optimal capital structure?
b. At what debt-to-capital ratio is the company's WACC minimized?
Business
1 answer:
Alex787 [66]3 years ago
3 0

Answer:

The Ideal Capital structure is approximately 20% of Debt and 50% of Equity. Thus, Optimal Capital Structure of Tobang Company is 40:60.

At 40% debt ratio the company’s Weighted Average Cost of Capital (WACC) is minimized.

Explanation:

You might be interested in
Wolverine Corporation plans to pay $3 dividend per share on each of its 300,000 shares next year. Wolverine anticipates earnings
lesantik [10]

Answer:

new equity  $  1,425,000

new debt     $    950,000

Explanation:

retained earnings

300,000 x (6.25 - 3) = 975.000

If debt is 0.4 of assets then by deifinition:

assets = liab+ equity

1 = 4 + equity

equity = 0.6 (60%)

<u>Retained Earnings breakpoint</u>

975,000 / 0.6 = 1,625,000‬

The company can riase capital expenditured for 1,625,000 and mantaining his capital structure.

As the company need 4,000,000 it will need to raise more capital as it surpass the retained earnings breakpoint.

4,000,000 - 1,625,000 = 2,375,000

2,375,000 x 0.6 = 1,425,000 new equity

2,375,000 x 0.4 =   950,000 new debt

4 0
3 years ago
Can someone help me please? I Attached the question.<br> THANKS!!
Rasek [7]

Answer:

The absolute reference is $D$2

The relative reference is A2

The Mixed reference is  $D2

Explanation:

The absolute reference is  identify when $ fixes the cell row and colum

The relative reference is that any colum or row can be altered and there is nothing fixed with $

The Mixed reference is  identify when $ either the cell row or colum

4 0
3 years ago
Will is currently in a 22% tax bracket and has a 7.2% savings rate of return. What is his after-tax savings rate of return
larisa86 [58]

Based on the information given his after-tax savings rate of return is 5.62%.

<h3>After-tax saving rate of return</h3>

Using this formula
After-tax savings rate=Saving rate of return×(1-Tax rate)

Where:

Saving rate of return=7.2%

Tax rate=22%

Let plug in the formula

After-tax savings rate=0.072×0.78

After-tax savings rate=0.05616×100

After-tax savings rate=5.62% (Approximately)

Inconclusion his after-tax savings rate of return is 5.62%.

Learn more about After-tax savings rate here:brainly.com/question/3520758

3 0
2 years ago
Randy is 60 years old and realizes that his reading speed and eyesight are not as robust as they were when he was younger. he st
Lady bird [3.3K]
Randy now listens to the books on tape. randy is using Selective optimization with compensation  in order to participate in the book club.  It is<span> a strategy for improving health and well being in older adults, it is also a model for successful ageing. Seniors should select and optimize their best abilities and most intact functions while compensating for declines and losses.  </span>
7 0
3 years ago
Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and m
yan [13]

The computation of the break-even point in dollar sales for each product is as follows:

Carvings = $234,400 ($46,880/0.2)

Mementos = $789,400 ($631,520/0.8)

<h3>What is the break-even point?</h3>

The break-even point represents the dollar sales or units at which the entity does not incur any loss or earn any profit.

At the break-even point, the total costs are equal to the total revenue.

<h3>Data and Calculations:</h3>

                                  Carvings     Mementos

Sales                         $ 974,400   $ 974,400

Variable costs             779,520       194,880

Contribution margin    194,880      779,520

CM Ratio                        20%             80%

Fixed costs                    46,880      631,520

Income                     $ 148,000   $ 148,000

Break-even point = Fixed costs/CM Ratio

Thus, the break-even points in sales dollars are Carvings, $234,400,, and Mementos, $789,400.

Learn more about the break-even point at brainly.com/question/15281855

#SPJ1

7 0
2 years ago
Other questions:
  • Organizational culture refers to: a. the complex set of ideologies, symbols, and core values that are shared throughout the firm
    9·1 answer
  • Which type of account offers the highest rate of interest? A. regular checking B. money market C. regular savings D. certificate
    11·2 answers
  • Fein Company provided the following information relating to cash payments:
    13·1 answer
  • One of Tony Hsieh’s most important roles now is to act as a cultural leader for Zappos. Using your knowledge of cultural leaders
    7·1 answer
  • Find the value of a stock that is expected to pay a dividend next year of 2.20 assuming you are required return is 12 percent.
    10·1 answer
  • Spark Company's static budget is based on a planned activity level of 60,000 units. At the same time the static budget was prepa
    15·1 answer
  • Auto Parts, Inc. is medium-sized company that manufactures auto parts in Buffalo, New York. The company currently loses $40,000
    10·1 answer
  • On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000. On July 9, Ritts acc
    10·1 answer
  • Presented below is pension information related to MJ Inc. for the year 2021: Service cost $410,000 Interest on projected benefit
    5·1 answer
  • KLM Corporation's quick assets are $6,123,000, its current assets are $13,440,000 and its current liabilities are $8,144,000. It
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!