Answer:
TurnBull's Weighted Average cost of capital is higher by 1.07% if the used common Equity to raised the capital.
Explanation:
First, using the WACC formula and using Retained earnings cost of Capital. we get the following outcome.
WACC = Debt W x after tax cost of Debt + Preferred Stock weight x Cost of capital + Equity W x Cost of Capital
WACC = 45% x 8.33% + 4% x 12.20% + 51% x 14.70% =
WACC = 3.75% + 0.49% + 7.50% = 11.73%
Second, using the WACC formula and using common equity cost of Capital. we get the following outcome.
WACC = Debt W x after tax cost of Debt + Preferred Stock weight x Cost of capital + Equity W x Cost of Capital
WACC = 45% x 8.33% + 4% x 12.20% + 51% x 16.80% =
WACC = 3.75% + 0.49% + 8.57% = 12.80%
Increase Cost using common equity over Retained earnings is (12.80% - 11.73% ) = 1.07%
Answer:
The target stock price in year 1 is $51.12
Explanation:
Given SE = $6 MIL, NI= $906 000, Div= $408180, Shares= 200000, PE ratio= 24 , SP =?
W e will use the price earning ratio as we are are given the benchmark PE ratio and this ratio measures the stock price relative to it profits
PE = Stock price / Earnings per share
Need to calculate Earnings per share
EPS = net Income - dividends/ oustanding Shares
=906000-480180/200000
=$2.1291/$2.13
Sustitute in the formula for PE ratio
24 = Stock Price/2.13
Stock Price = $51.12
Therefore the target stock price in year 1 is $51.12
Answer:
One year from the date of the listing if the transaction is not consummated.
Explanation:
Retention period is the number of years as enforced by the law that a certain records must be kept compulsorily before it is eligible for destruction. The retention period shall be 1 one year from the date of the from the date of listing or closing of the transaction if the transaction is not consummated. Retention period is generally in many cases is 1 year and not more than that.
Answer:
c) Offering a discount to students and seniors.
Explanation:
Price discrimination involves a supplier selling the same good at different prices to different customers. Price discrimination is usually done to take advantage of consumer surplus.
If the choclatier knows the price group that will pay lower, he can target them and give the option of paying lower.
In this case offering discount to students and seniors shows the choclatier has identified these class of customers as the one that are willing to by chocolates below $20.
Answer:
26.14%
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
IRR can be calculated using a financial calculator
Cash flow in year 0 = $-60,000
Cash flow each year from year 1 to 5 = $20,000
Cash flow in year 6 = $20,000 + $10,000 = $30,000
IRR = 26.14%
To find the IRR using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
I hope my answer helps you
