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nekit [7.7K]
2 years ago
7

Western Wear is considering a project that requires an initial investment of $602,000. The firm maintains a debt-equity ratio of

.55 and has a flotation cost of debt of 4.9 percent and a flotation cost of equity of 10.2 percent. The firm has sufficient internally generated equity to cover the equity portion of this project. What is the initial cost of the project including the flotation costs
Business
1 answer:
telo118 [61]2 years ago
8 0

Answer:

Initial cost  $612,652

Please find the detailed answer as follows:

Explanation:

The calculations are made considering the following formulas

Average flotation cost = (1/1.55) (0) + (0.55/1.55) (0.049) = 0.01739

Initial cost = $602,000/(1 - 0.01739) = $612,652

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Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bond
eduard

Answer and Explanation:

The journal entry is shown below;

Bond payable $1,000,000

Loss on retirement of bond $20,000

           To Discount on bond $10,000

           To Cash $1,010,000

(Being the loss on retirement of bond is recorded)

For recording this we debited the bond payable and loss as it decrease the current liabilities and it increased the losses at the same time it decreased the discount and decreased the cash so the respective accounts are credited

7 0
2 years ago
"Bill and Ted form a partnership with cash contributions of $40,000 each. Bill is a limited partner. Under the partnership agree
tankabanditka [31]

Answer:

Bill and Ted's basis in the partnership are as follows;

Ted $140,000

Bill $40,000

Explanation:

A limited partner is a partner who contribute cash only, does not partake in the running of the business hence has limited liability. In other words, he tends to lose his investment only in the partnership business should it default . Since Tim is a limited partner, his basis in the partnership business will be the $40,000 only that he contributed in the formation of the business.

Since Ted is required under the partnership agreement to pay the creditors if the partnership defaults, that makes him a general partner. A general partner is a partner who takes responsibility for the actions of the business, meaning that he controls the affairs of the business and has unlimited liability. Therefore, his basis in the partnership business will be $140,000. This is gotten by adding up his cash contribution of $40,000 and $100,000 loan from the bank, hence liable to pay back the loan should the partnership business fails to meet up with it's obligations.

3 0
2 years ago
Identify the careers that require a college degree and those that require an apprenticeship.
Montano1993 [528]

Answer:

solar panel repair technician : apprenticeship.

petroleum engineer: college degree

industrial production manager : college degree

plumber : apprenticeship.

landscape architect : apprenticeship.

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7 0
2 years ago
Read 2 more answers
Alpha Company has riskless debt, a debt-equity ratio of .46, a tax rate of 35 percent, and an unlevered firm beta of 1.23. What
Colt1911 [192]

Answer:

Equity Beta= 2,529

Explanation:

The risk of investing in a particular stock is measured with a metric referred to as equity beta. Equity Beta measures the volatility of the stock to the market, how sensitive is the stock price to a change in the overall market. It compares the volatility associated with the change in prices of a security. It changes with the capital structure of the company which includes the debt portion.

There are 3 methods to calculate Equity Beta:

1- Using the CAPM Model

2- Using Slope Tool

3- Using Unlevered Beta

In this exercise, we have the information to use the third method.

Equity Beta Formula = Unlevered Beta [ 1 + (D/E)( 1-Tax )]

Unlevered Beta= 1,23

D/E= 0,46

Tax rate= 0,35

Equity Beta = 1,23 + (1+0,46*0,65)

Equity Beta= 2,529

8 0
2 years ago
. What is Coleman’s cost for up to $300,000 of newly issued common stock, re1? What happens to the cost of equity if Coleman sel
Svetlanka [38]

Explanation:

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2 years ago
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