Question Completion:
a. Find the Pretax cost of Debt, cost of preference, and ordinary shares.
b. Calculate Hellman Pre- tax and after Tax WACC.
Answer:
Hellman Industries
a) Pretax cost of debt = Yield on bonds = 8.3%
b) Cost of Common equity
= 11.77%
c) Cost of preferred stock
= 10.53%
d) Pre-tax WACC
= 10.3%
e) After-tax WACC
= 8.93%
Explanation:
a) Data and Calculations:
Weight of Common stock = 50%
Weight of Preferred stock = 10%
Weight of Debts (Bonds) = 40% (100% - 50% - 10%)
Market return on common stock = 11.4%
Risk-free return (treasury bills yield) = 4%
Beta = 1.05
Average yield to maturity of Hellman semiannual coupon bonds = 8.3%
Market price of Preferred stock = £76 per share
Par value of Preferred stock = £100
Dividend rate of Preferred stock = 8%
Dividend per share = £8 (£100 * 8%)
Cost of Preferred stock = £8/£76 * 100 = 10.53%
Marginal tax rate = 40%
a) Pretax cost of debt = Yield on bonds = 8.3%
After-tax cost of debt = 8.3% (1 - 0.4) = 4.98%
b) Cost of Common equity, Re = Risk Free Rate + Beta x (Market Return - Risk Free Rate) = 4% + 1.05 x (11.4% - 4%)
= 4% + 1.05 * 7.4%
= 4% + 7.77%
= 11.77%
c) Cost of preferred stock = Dividend per share/Price * 100
= $8/$76 * 100
= 10.53%
d) Pre-tax WACC = 50% * 11.77% + 10% * 10.53% + 40% * 8.3%
= 5.885 + 1.053 + 3.32
= 10.258
= 10.3%
e) After-tax WACC = 50% * 11.77% + 10% * 10.53% + 40% * 4.98%
= 5.885 + 1.053 + 1.992
= 8.93%
If the price of oil, a close substitute for coal, increases then:
a. the demand curve for coal will shift to the right.
b. equilibrium price and quantity of coal will not change.
c. supply curve for coal will shift to the right.
d. demand curve for coal will shift to the left.
e. supply curve of coal will shift to the left.
Answer:
A
Explanation:
Substitute goods are goods that can be used in place of another good.
if the price of a good increases, the demand for the substitute increases and if the price of the good reduces, the demand for the substitute increases.
If the price of oil increases, it becomes cheaper to buy coal. As a result, there would be a rightward shift of the demand curve for coal. As a result, the equilibrium price and quantity would increase
Sports Corp has 11.7 million shares of common stock outstanding, 6.7 million shares of preferred stock outstanding, and 2.7 million bonds. If the common shares are selling for $26.7 per share, the preferred share are selling for $14.2 per share, and the bonds are selling for 96.83 percent of par, what would be the weight used for common stock in the computation of Sports's WACC
Answer: 10.34%
Explanation:
First calculate the value of the company's total capital:
= Common stock + Preferred stock + Debt
= (11,700,000 * 26.70) + (6,700,000 * 14.20) + (2,700,000 * 96.83/100 * 1,000 par value)
= $3,021,940,000
The weight to be used for common stock is:
= Common stock value / Total capital value
= (11,700,000 * 26.70) / 3,021,940,000
= 312,390,000 / 3,021,940,000
= 10.34%
pls help me with in this i just want the 3 and 4th one...
Answer:
3. The special concept reminded by the phrase "Exchanging Butter Cake for Dates" is:
Trade by barter.
4. The need fulfilled by this business is people's demand for Cake.
The want fulfilled by this business is the organization's supply of dates for its production of cake.
Explanation:
A trade by barter involves the exchange of one good or service by one trading party for another good or service from the coincidental trading party without the use of money or monetary mediums. Trade by barter enables people without money to fulfill their needs. The major problem with trade by barter is that there must be coincidence of wants by the two trading partners. This is not always feasible.
You discover that many consumers want easy access to pens in their cars, so you decide to produce a steering wheel that has a pen tucked inside that can conveniently pop out whenever someone needs it. The steering wheels become very popular with car companies. Developing this product is an example of what
Answer: c. Allocative efficiency
Explanation:
When an economy is experiencing allocative efficiency, it means that goods in the economy are being produced according to consumer preferences. This means that if consumers want a certain good in a certain quantity, the economy will produce that good in that quantity.
This is the case here. You saw that consumers wanted a good and you went ahead and produced it therefore giving consumers what they wanted.
Jason is faced with two choices: A BMW costing $40,000 gives him an additional 1005 units of utility, and a laser printer costing $1,000 gives him an additional 25 units of utility. Rational choice theory would predict that he would choose:
Answer:
either a BMW or a laser printer because they yield the same marginal printer
Explanation:
A rational consumer would choose the good that provides a higher utility
Marginal utility is the additional satisfaction received from consuming an additional unit of a good or service. Marginal utility is the additional utility derived from consuming one more unit of a good. the consumption decision is to consume more units of a good that gives the higher utility per good.
Marginal utility per good = marginal utility / price of the good
BMW = 1005 /40,000 = 0.025
Printer = 25 / $1000 = 0.025
An employee earned $1,000 in the first pay period of the current year. How much is the total employer and employee social security taxes on these earnings? (Use the simplified rate shown in illustrations.)
Answer: $120
Explanation:
The total employer and employee social security taxes is 6% fir the employee and 6% for the employee which then makes up 12%.
Since the employee earned $1,000 in the first pay period of the current year, then the total employer and employee social security taxes on these earnings will be:
= 12% × $1000
= 0.12 × $1000
= $120
At the beginning of the year, a company had accounts receivable of $700,000 and an allowance for doubtful accounts with a credit balance of $60,000. During the current year, sales on account were $195,000 and collections on account were $115,000. Also during the current year, the company wrote off $11,000 in uncollectible accounts. At year-end, an analysis of outstanding accounts receivable indicated that the allowance for doubtful accounts should have a $72,000 credit balance so the company records the appropriate year-end adjusting entry. How much did the cash realizable value change during the current year
Answer:
$77,000
Explanation:
Calculation to determine How much did the cash realizable value change during the current year
First step
Ending accounts receivables = Beginning accounts receivables + Sales on account - collections on account - Write offs
Ending accounts receivables = $700,000 + $195,000 - $95,000 - $11,000
Ending accounts receivables= $789,000
Second step
Ending cash realizable value = Ending accounts receivables - Ending allowance for doubtful accounts
Ending cash realizable value = $789,000 - $72,000
Ending cash realizable value= $717,000
Now let determine the Change in cash realizable value
Change in cash realizable value = Ending cash realizable value - Beginning cash realizable value
Change in cash realizable value= $717,000 - 640,000
Change in cash realizable value= $77,000
Therefore How much did the cash realizable value change during the current year will be $77,000
Company A produces paper and sells it to Company B for a total of $183. Company B uses the paper to make books and then sells the books to consumers for a total of $342.What is the value of GDP in this simple economy?
Answer:
$159
Explanation:
Value = cost of books - cost of paper
342 - 183 = 159
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
the cost of paper is not included because it is an intermediate good and not a final good.
An intermediate good is a good that is used in the production of the final good.
If it is added to GDP, it would result in double counting
The value of GDP in this simple economy is $159.
A gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
The formula for GDP is Consumption spending by households + Investment spending by businesses + Government spending + Net export
Note that "the cost of paper is not included because it is an intermediate good and not a final good and an intermediate good is a good that is used in the production of the final good"
The value of GDP = Cost of books - Cost of paper
The value of GDP = 342 - 183
The value of GDP = 159
In conclusion, the value of GDP in this simple economy is $159.
Read more about gross domestic product
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Yesterday, the dollar was trading in the foreign exchange market at 1.10 euros per dollar. Today, the dollar is trading at 1.20 euros per dollar. The dollar has ________ and a possible reason for the change is ________ in the expected future exchange rate.
Answer: appreciated; an increase.
Explanation:
Since there's an increase in the dollar rate at the foreign exchange market at 1.10 euros per dollar to 1.20 euros per dollar, this implies that the dollar has appreciated.
The appreciation of the dollar simply means that there's an increase in the value of the dollar when it's compared to.anitgee currency. Tge reason for the change is the increase in the expected future exchange rate.
XYZ Co. reported the following results for October: Sales $ 32,000 Cost of goods sold (all variable) $ 6,000 Total variable selling expense $ 2,500 Total fixed selling expense $ 4,700 Total variable administrative expense $ 1,800 Total fixed administrative expense $ 3,000 The contribution margin for October is:
Answer:
See below
Explanation:
Given the information above,
Contribution margin = Sales - Variable expenses
Sales = $32,000
Variable expenses = Total variable selling expenses + Total variable administrative expenses
= $2,500 + $1,800
= $4,300
Therefore,
Contribution margin = $32,000 - $4,300
Contribution margin = $27,700
Therefore, the contribution margin for October is $27,700
CompuGlobal is an American firm producing computers. CompuGlobal imports computer components from Taiwan and assembles them domestically. Suppose that in the United States, a computer sells for $800 and that 60% of the computer’s value comes from the value of the imported components. The United States imposes a 50% tariff on computers and a 10% tariff on the computer’s components. Assume that costs of producing components are the same in the United States and Taiwan and that transit costs are nonexistent. Based on the information provided, the effective rate of protection that CompuGlobal receives from the tariff is
Answer: 110%
Explanation:
The effective rate of protection is used in measuring the final tariff in a particular sector and it's expressed as:
g = (t -ai,ti) / (1 - ai)
where,
g = effective protection rate
ai = nominal tariff rate = 0.6
t = cost of intermediate input = 0.5
ti = nominal tariff on intermediate input = 0.1
The computer price here is $800 while the input price is 60% of $800 which will be:
= 60% × $800 = $480
nominal tariff rate = 480/800 = 0.6
Nominal tariff on final goods, t = 50% = 0.5
Tariff on imported input, ti = 10% = 0.1
Using the formula:
g = (t -ai,ti) / (1 - ai)
g = [0.5 - (0.6×0.1)] / (1 - 0.6)
g = (0.5 - 0.06) / 0.4
g = 0.44/.0.4
g = 1.10
g = 110%
The effective rate of protection is 110%
Sybil, age 40, is single and supports her dependent parents who live with her, as well as her grandfather who is in a nursing home. She has AGI of $80,000 and itemized deductions of $8,000. What is the taxable income?
Answer:
$61,650
Explanation:
Calculation to determine the taxable income
Adjusted Gross Income (AGI) $80,000
Deduct Standard deduction (head of household) ($18,350)
Taxable Income $61,650
($80,000-$18,350)
Therefore the vthe taxable income is $61,650
What are the resources og microeconomics?
Answer:
resources like land, tools, money, time, labor and enterprise
Over the last two decades the reduced importance of certain institutions in the primary mortgage market has been largely offset by an expanded role for others. Which has diminished, and which has expanded
Answer:
Thrifts role have decreased whereas, mortgage and commercial banks roles have increased.
Explanation:
In simple words, Credit unions and cooperative savings banks are examples of thrifts that offer a multitude of deposits and lending services. Thrifts are different from conventional institutions in that organizations may draw money through the Federal Home Loan Bank Network, allowing them to charge greater interest to its members.
The ease of doing business and less documentation with commercial banks promoted their growth.
Find the price a purchaser should be willing to pay for the given bond. Assume that the coupon interest is paid twice a year. $30,000 bond with coupon rate 4.4% that matures in 7 years; current interest rate is 6.8%.
Answer:
Bond Price= $26,042.12
Explanation:
Giving the following information:
Coupon= (0.044/2)*30,000= $660
YTM= 0.068/2= 0.034
Time to maturity= 7*2= 14 semesters
Face value= $30,000
To calculate the price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 660*{[1 - (1.034^-14)] / 0.034} + [30,000 /(1.034^14)]
Bond Price= 7,256.14 + 18,785.98
Bond Price= $26,042.12
The AD Curve ________.
a. all of the choices are correct.
b. is downward sloping, because with higher inflation comes higher interest rates and lower spending, so equilibrium aggregate output declines
c. indicates the level of aggregate output corresponding to different goods-market-clearing levels of the interest rate
d. explains how inflation affects output in the long run
Answer:
a. all of the choices are correct.
Explanation:
In Economics, there are primarily two (2) factors which affect the availability and the price at which goods and services are sold or provided, these are demand and supply.
Demand can be defined as the total amount of goods or services that consumers are willing and able to purchase at a given price.
The Law of Demand states that quantity of goods or services demanded varies inversely with their price, other things constant or being equal. Thus, the smaller the quantity of goods or services demanded, the higher the price and vice-versa.
Aggregate demand (AD) can be defined as the total quantity of output (final goods and services) that is demanded by consumers at all possible price levels in an economy at a particular time.
An aggregate demand (AD) curve gives a negative relationship between the aggregate price level for goods or services and the quantity of aggregate output demanded in an economy at a specific period of time.
In conclusion, all of the aforementioned statements best describes an aggregate demand (AD) curve.
Groupon offers online coupons for bargains at local shops and restaurants. Which of the following is a reason that rivals are limiting its growth?
a. Not many firms possess the same capability
b. Its core capability is easily imitated
c. Its core capability is not easily imitated.
d. There are few equivalent capabilities.
Answer:
b. Its core capability is easily imitated
Explanation:
In Business management, a strategy can be defined as a set of guiding principles, actions and decisions that an organization combines so as to achieve its business goals, attract customers and possess a competitive advantage over its rivals in the industry.
In this scenario, Groupon offers online coupons for bargains at local shops and restaurants. A reason that rivals are limiting its growth is simply because its core capability is easily imitated i.e offering of coupons for bargains.
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
The comparative advantage gives a country a stronger sales margin than their competitors as they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
On December 31, 2018, a company had assets of $34 billion and stockholders' equity of $28 billion. That same company had assets of $50 billion and stockholders' equity of $12 billion as of December 31, 2019. During 2019, the company reported total sales revenue of $27 billion and total expenses of $25 billion. What is the company's debt-to-assets ratio on December 31, 2019
Answer:
131.6%
Explanation:
Total assets is $50 billion
Liabilities = 50-stock holder equity which is $12 billion
= 50-12
= $38 billion
Therefore the debt to assets ratio can be calculated as follows
= 50 billion/38 billion
= 1.3157×100
°= 131.6
Hence the debts to assetsrayion is 131.6%
Suppose ABCD's stock price is currently $50. In the next six months, it will either fall to $40 or rise 8 to $60. What is the current value of a six-month call option with an exercise price of $50? The six- month risk-free interest rate is 2% (periodic rate).
A. $5.39
B. $15.00
C. $8.25
D. $8.09
An oligopolistic market structure is distinguished by several characteristics, one of which is either similar or identical products. Which of the following are other characteristics of this market structure?
a. Market control by many small firms
b. Difficult entry
c. Mutual interdependence
d. Market control by a few large firms
e. Mutual dependence
Answer:
The correct option is d. Market control by a few large firms.
Explanation:
An oligopolistic market structure can be described as a market structure in which there is a small number of large firms, and none of the large firms can prevent the other large firms in the market from wielding great power.
An oligopolistic market structure is there a market that is dominated and controlled by by a few large firms.
Therefore, the correct option is d. Market control by a few large firms.
Cost of Goods Sold, Cost of Goods Manufactured
Glenville Company has the following information for April:
Cost of direct materials used in production $41,000
Direct labor 47,000
Factory overhead 20,000
Work in process inventory, April 1 34,000
Work in process inventory, April 30 27,000
Finished goods inventory, April 1 24,000
Finished goods inventory, April 30 18,000
a. For April, determine the cost of goods manufactured. Using the data given, prepare a statement of Cost of Goods Manufactured.
b. For April, determine the cost of goods sold. Using the data given, prepare a statement of Cost of Goods Sold.
Answer and Explanation:
a. The preparation of the statement of Cost of Goods Manufactured is presented below:
Work in process inventory, April 1 34,000
Add:
Cost of direct materials used in production $41,000
Direct labor 47,000
Factory overhead 20,000
Less:
Work in process inventory, April 30 27,000
Cost of goods manufactured $115,000
b. The preparation of the statement of Cost of Goods Sold is presented below:
Finished goods inventory, April 1 24,000
Add: cost of goods manufactured $115,000
Less: Finished goods inventory, April 30 18,000
Cost of goods sold $121,000
A company issued 30 shares of $.50 par value common stock for $12,000. The credit to additional paid-in capital would be ________.
A. $1.985.
B. $12,000.
C. $15.
D. $10,150.
Answer: $11,985
Explanation:
The credit to the Additional paid-in capital is the excess over the pa value of the stock that was sold. The formula is therefore:
Additional paid-in capital = Cash stock was sold for - Par value of stock
Par value of stock = 30 shares * 0.50
= $15.00
Additional paid-in capital = 12,000 - 15
= $11,985
and Associates, a law firm, paid $30000 for 12 months' rent in advance on October 1 of the current year. The company's fiscal year-end is December 31. Prepare the journal entries for the rent payment on October 1 and the necessary adjusting journal entry on December 31. Omit explanations
Answer and Explanation:
The journal entries are shown below:
On Oct 1
Rent expense Dr $30,000
to cash $30,000
(being cash paid)
Here rent expense is debited as it increased the expense and credited the cash as it decreased the assets
On Dec 31
Rent expense Dr ($30,000 × 9 ÷ 12) $22,500
To prepaid rent $22,500
(being rent expense is recorded)
Here ent expense is debited as it increased the expense and credited the prepaid rent as it decreased the assets
Another bank is also offering favorable terms, so Rahul decides to take a loan of $18,000 from this bank. He signs the loan contract at 11% compounded daily for three months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term
Answer:
Explanation:
final loan amount = $18,455.86
so correct option is c. $18,455.86
Explanation:
given data
loan = $18000
rate = 10%
time = 3 months
to find out
total amount that Rahul owes the bank at the end of the loan
solution
we know that number of day in 3 months is
number of day = 3 ×
number of day = 91.25 days
loan rate =
loan load = 0.00027397
now final loan amount will be
final loan amount = loan amount ×
final loan amount = $18000 ×
final loan amount = $18,455.86
so correct option is c. $18,455.86
Croft Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its cost of equity is 16 percent, and the cost of debt is 8 percent. The relevant tax rate is 24 percent. What is the company's WACC
Answer:
13.02%
Explanation:
Debt = 30% and Common stock = 70%
Cost of equity is 16% and debt is 8%
Tax is 24%
WACC = Cost of equity*Weight of equity + After tax cost of debt*Weight of debt
WACC = (0.16*0.70) + (0.08*(1-0.24)*0.30)
WACC = 0.112 + 0.01824
WACC = 0.13024
WACC = 13.02%
So, the the company's WACC is 13.02%
If the average annual rate of return for common stocks is 11.7 percent, and 4.0 percent for U.S. Treasury bills, what is the average market risk premium?
Answer:
7.7%
Explanation:
Risk premium is the return an investor would want for holding a risky bond. It is the excess return earned over holding a risk free bond
Risk premium = return on risky asset - return on U.S. Treasury bills
The U.S. Treasury bills is considered to be risk free because the US government cannot default
On the other hands, stocks are risky because companies can default on payment of dividends due to various reasons e.g. insolvency
11.7 - 4 = 7.7%
Data collection tool of a qualitative research
Answer:
The methods of qualitative data collection most commonly used in health research are document study, observations, semi-structured interviews and focus groups.
A public works department in a metropolitan area is looking into buying a major equipment to enhance productivity. The initial cost is estimated to be $600,000. It is projected that new equipment will help save $250,000 the first year and decrease gradually by $50,000 for the next four years. Determine the payback period for this equipment purchase.
Answer:
Public Works Department
The payback period for this equipment purchase is:
= 3 years.
Explanation:
a) Data and Calculations:
Initial cost of new equipment = $600,000
Savings from the equipment:
Year 1 = $250,000
Year 2 = $200,000 ($250,000 - $50,000)
Year 3 = $150,000 ($200,000 - $50,000)
Year 4 = $100,000 ($150,000 - $50,000)
Year 5 = $50,000
Payback period:
Year 1 = $250,000
Year 2 = $450,000 ($250,000 + $200,000)
Year 3 = $600,000 ($450,000 + $150,000)
our Company will open a new store on January 1. Based on experience from its other retail outlets, Entertainment Inc. is making the following sales predictions: Cash Sales Credit Sales January $80,000 $160,000 February $50,000 $170,000 March $60,000 $190,000 April $50,000 $210,000 You estimate that the pattern of collection of credit sales will be 45% in the month of sale and 40% in the month following the sale; 8% in the third month, the remaining 7% is uncollectable. Based on this data calculate the estimated total cash collections for March
Answer:
Entertainment Inc.
The estimated total cash collections for March are:
= $226,300.
Explanation:
a) Data and Calculations:
Cash Sales Credit Sales
January $80,000 $160,000
February $50,000 $170,000
March $60,000 $190,000
April $50,000 $210,000
January February March April
Credit Sales $160,000 $170,000 $190,000 $210,000
Cash collections:
45% sales month $72,000 $76,500 $85,500 $94,500
40% ffg sales 64,000 68,000 76,000
8% third month 12,800 13,600
7% uncollectible
Total cash collections for March $166,300
Cash sales 80,000 50,000 60,000 50,000
Total cash collected for March $226,300
Machinery was purchased for $340,000. Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $60,000 salvage value at the end of its 5-year useful life. Annual depreciation expense using the straight-line method will be a. $78,800. b. $57,200. c. $66,800. d. $56,000.
Answer:
$66,800
Explanation:
Depreciation is used in expensing the cost of an asset
Depreciation reduces the value of an asset
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
Cost = $340,000. + $14,000 + $40,000 = $394,000
($394,000 - $60,000) / 5 = $66,800
