Consider a coupon bond with $1000 face value, 10% coupon rate, 5 years of maturity selling for $700. The yield to maturity is

Design Interiors has a cost of equity of 14.9 percent and a pretax cost of debt of 8.6 percent. The firm's target weighted avera

Savatey [412]

Answer:

0.73

Explanation:

Given that

WACC = 11%

Tax rate = 34%

Cost of equity = 14.9 %

Cost of debt = 8.6%

Recall that

WACC = (cost of equity × % of equity) + (cost of debt × % of debt) + ( 1 - tax rate)

We are to find

Cost of debt and cost of equity

Let

Cost of debt be x

Cost of equity be (1 - x)

Thus,

0.11 = (1 - x)(0.149) + (x)(0.086)(1 - 0.34)

x = 0.4228

Therefore,

Debt-equity ratio

= Cost of debt/cost of equity

= 0.4228/(1 - 0.4228)

= 0.73

4 0

3 years ago

Read 2 more answers

Question help what is the definition of monopoly?

Juliette [100K]

Monopoly is a seller that is selling a unique product in the market and in a monopoly market, the seller faces no competition. 
A firm that is a monopoly can ignore the actions of other firms. From the given option the following best describes monopoly:
C: A monopoly is a firm that is the only seller of a product in a given industry.

8 0

3 years ago

Can a manager yell at employees in front of customers answers

Setler [38]

Can you yell at your kids infront of other people. The answer is yes :)

5 0

3 years ago

The following information relates to the assets of Westfield Semiconductors as of December 31, 2019. Westfield uses the straight

Salsk061 [2.6K]

Answer:

See the explanation below.

Explanation:

Given the following:

Asset Acquisition-Cost Expected-Life Residual-Value Time-Used

Land $104,300 Infinite $100,000 10 years

Building 430,000 25 years 30,000 10 years

Machine 285,000 5 years 10,000 2 years

Patent 80,000 10 years 0 3 years

Truck 21,000 100,000 miles 3,000 44,000 miles

Therefore, we have:

Building annual depreciation = ($430,000 - $30,000) / 25 = $16,000

Building net book value (NBV) = $430,000 - (16,000 * 10) = $270,000

Machine annual depreciation = ($285,000 - 10,000) / 10 = $27,500

Machine NBV = $285,000 - ($27,500 * 2) = $230,000

Patent annual amortization = $80,000 / 10 = $8,000

Patent net written down value = $80,000 - ($8,000 * 3) = $56,000

Truck accumulated depreciation = ($21,000 - 3,000) * (44,000 / 100,000) = $7,920

Truck NBV = $21,000 - $7,920 = 13,080

Westfield Semiconductors Balance Sheet (Partial) as of December 31, 2019.

Details $

Property, plant, and equipment:

Land (Cost) 104,300

Building (NBV) 270,000

Machine (NBV) 230,000

Truck (NBV) 13,080

Total PPM 617,380

Intangible assets:

Patent (NRV) 56,000

Total tangible and intangible assets  673,380

4 0

3 years ago

Assume a firm has a beta of 1.2. All else held constant, the cost of equity for this firm will increase if the: beta decreases.

eduard

Answer:

Risk-free rate decreases

Explanation:

The CAPM formula for calculating cost of equity requires one to know the value of 3 pieces of information only:

1. the market rate of return,

2. the beta value

3. the risk-free rate.

Ra = Rrf + [Ba∗(Rm−Rrf)]

where:

Ra=Cost of Equity

Rrf = Risk-Free Rate

Ba = Beta

Rm=Market Rate of Return

From the formula

Ra = Rrf + [1.2∗(Rm−Rrf)]

Ra = Rrf + 1.2Rm - 1.2Rrf

From Ra = 1.2Rm -0.2Rrf

From the expression above, it can be seen that the lower the value of Rrf (Risk-Free rate), the higher the value of Ra.

4 0

3 years ago