Old Spanish-type houses in have huge high-pitched roo

ABC Corporation has 2.8 million shares of stock outstanding. The stock currently sells for $50 per share. The firm’s debt is pub

Hoochie [10]

Answer:

13.38%

Explanation:

The formula to compute WACC is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of common stock) × (cost of common stock)

where,

Market value of equity = 2,800,000 × $50 = $140,000,000

Market value of debt = 10,000,000 × 95% = $9,500,000

Weighted of debt = Debt ÷ total firm

The total firm includes debt, preferred stock, and the equity which equals to

= $140,000,000 + $9,500,000

= $149,500,000

So, Weighted of debt = ($9.5 million ÷ $149.50 million) = 0.0635

And, the weighted of common stock = (Common stock ÷ total firm)

= $140 million ÷ $149.50 million

= 0.9364

And, the cost of equity = risk free rate of return + Beta × market risk premium

= 5% + 1.25 × 7%

= 5% + 8.75%

= 13.75%

Now put these values to the above formula

So, the value would equal to

= ( 0.0635 × 12%) × ( 1 - 35%) + (0.9364 × 13.75%)

= 0.4953 + 12.88%

= 13.372%

7 0

2 years ago

Which one of the following is NOT one of the arguments against social responsibility as used by economist Milton Friedman?

777dan777 [17]

Answer:

B) Businesses can actually do very little in terms of social responsibility.

Explanation:

Milton Friedman is most famous for the defense of the Chicago School economics which is a neoclassical approach to macroeconomics. He favored free trade, smaller government and a slow but constant growth of the money supply. I personally disagree with neoclassical economists because they have the tendency to mess things up and time proves they are always wrong (that is a biased but positive statement). He was the father of monetarism, but if you look at his last two disciples, George Bush and George W. Bush, the outcome was not positive ⇒ 3 deep recessions in 3 presidential terms.

As a neoclassical economist, Friedman believed and argued in favor of the trickle down in economics. That means that if you allow the rich to get overwhelmingly rich, their riches will spill over to the rest of society. Not because they are good people that like to share their wealth, but because they need workers and employees to keep consuming goods and services in order to get the economy moving. Eventually the spilled over wealth should return to the top. So it is no wonder why he opposed corporate social responsibility, since wasting time and money in the community, employees or the environment was simply a waste of resources that could be used to increase stockholders' wealth.

I understand how theoretically this might work, but it takes the human factor out of the equation and expectations are extremely important in economics, that is why they always fail.

6 0

2 years ago

An accountant increases the price he charges for his services by 14 percent. In response, the demand for his services decreases

blondinia [14]

Answer:

Decrease

Explanation:

Given that

Change in quantity demanded = 6%

change in price = 14%

Price elasticity of demand = (Percentage change in quantity demanded) ÷ (percentage change in price)

= 6% ÷ 14%

= 0.42

Price elasticity of demand is greater than 1 that which means demand is elastic. Therefore the increase in price, the revenue will decrease because demand is elastic.

5 0

2 years ago

Colby and carleton own a business. most of their friends and colleagues would say colby, who manages the business on a daily bas

Ad libitum [116K]

Colby would rate low on openness to experience, while Carleton would rate high on this dimension based on the five-factor model.

Since Colby’s thinking is conventional, he would most likely stick with the common and proven methods in handling a business, thus, the rationale on his low rating to openness to experience.

7 0

2 years ago

Which of the following cooking methods would produce food with a smoky, slightly charred flavor? A. Saut ing B. Grilling C. Roas

netineya [11]

Answer:

B

Explanation:

Grilling is the cooking method that would produce food with a smoky, slightly charred flavor.

8 0

2 years ago

Old Spanish-type houses in have huge high-pitched roo​

Old Spanish-type houses in have huge high-pitched roo