What is the formula for wacc?

On its December 31, 20X5 balance sheet, Shin Co. has income tax payable of $13,000 and a current deferred tax asset of $20,000,

mariarad [96]

Answer:

$10,000

Explanation:

To calculate income tax expense we must add income liability for the year, minus the changes in deferred tax accounts and add the change in value for deferred tax assets.

income tax expense = $13,000 - ($20,000 - $15,000) + ($20,000 x 10%) = $13,000 - $5,000 + $2,000 = $10,000

3 0

3 years ago

Avicorp has a $15.5 million debt issue outstanding, with a 6.3% coupon rate. The debt has semi-annual coupons, the next coupon i

Studentka2010 [4]

Answer:

a) Pre-tax cost of debt is 8.45%

b) After tax cost of debt is 5.07%

Explanation:

a) Given:

Debt issue outstanding = $15.5 million

Semi-annual coupon rate = 0.063 / 2 = 0.0315

Assumed par value (FV) = $1,000

Coupon payment (pmt) = 0.0315 × 1000 = $31.5

Current bond price (PV) = 92% of $1,000 = $920

Time period (nper) = 5 × 2 = 10 periods

Calculate semi-annual rate using spreadsheet function =Rate(nper,pmt,PV,FV)

Semi-annual rate = 4.14%

Pmt and FV are negative as they are cash outflows.

YTM = 4.14 × 2 = 8.28%

Effective annual rate = $(1+\frac{Rate}{compounding\ periods}) ^{2} -1$

= $(1+\frac{0.0828}{2}) ^{2} -1$

= 0.0845 or 8.45%

b) Tax rate is 40%

After tax cost of debt = Pre tax cost of debt × (1 - 0.4)

= 0.0845 × 0.6

= 0.0507 or 5.07%

4 0

3 years ago

What are capital gains on an investment?

docker41 [41]

income that investors earn from buying and selling investments

3 0

3 years ago

A low home inflation rate relative to other countries would ____ the home country's current account balance, other things being

Musya8 [376]

Answer:

Increase; increase.

Explanation:

Inflation can be defined as the persistent rise in the price of goods and services in an economy.

A low home inflation rate relative to other countries would increase the home country's current account balance, other things being equal. Low growth in the home income level relative to other countries would increase the home country's current account balance, other things being equal. A country's current account balance is a statement of the value of its exports and imports of goods and services at a specific period of time.

Hence, when the level of inflation is low in a particular country; their current account balance would be high. However, when the level of inflation is high it results in low growth and as such increases the home country's current account balance, other things being equal.

7 0

2 years ago

Assume a company is considering adding a new product line with the following estimated cost and revenue data: Annual sales 6,000

AlladinOne [14]

Answer:

Financial advantage of $76,000

Explanation :

Concentrate on the incremental revenues (including incremental savings) and incremental costs (including opportunity cost) of adding the new product line.

Analysis of the addition of a new product line

Sales and Savings :

Sales (6,000 units × $ 180) $1,080,000

Sales of complementary products $31,000

Costs and Opportunity Costs :

Variable manufacturing costs per unit ($140 × 6,000 units) (840,000)

Variable selling costs per unit ($15 × 6,000 units) ($90,000)

Incremental fixed manufacturing costs ($ 65,000)

Incremental fixed selling costs ($ 40,000)

Financial advantage (disadvantage) $76,000

4 0

2 years ago