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brilliants [131]
2 years ago
14

Bruce & Co. expects its EBIT to be $165,000 every year forever. The company currently has no debt but can borrow at 8.6 perc

ent while its cost of equity is 14.7 percent. The tax rate is 21 percent. The company is planning to borrow $55,000 and use the loan proceeds to repurchase shares. What will be the WACC after recapitalization? Multiple Choice 15.07 percent 14.11 percent 14.51 percent 14.58 percent 14.57 percent
Business
1 answer:
zmey [24]2 years ago
6 0

Answer:

14.33%

Explanation:

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

According to WACC formula

WACC = ( Cost of equity x Weightage of equity ) + ( Cost of debt ( 1- t) x Weightage of debt )

First Calculate the Weightage

Market Value of Shares = EBIT / cost of equity = $165,000 / 14.7% = $1,122,449

Value of Debt = $55,000

Total = $1,122,449 + $55,000 = $1,177,449

Weightage

Equity =  $1,122,449 / $1,177,449 = 0.9533

Debt = 0.0467

Placing values in the WACC formula

WACC = ( 14.7% x 0.9533 ) + ( 8.6% ( 1 - 0.21 ) x 0.0467 )

WACC = 14.01% + 0.32% = 14.33%

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Restore Construction Company enters into a contract to remodel Sam’s Home Store, agreeing to use only products from United Build
BlackZzzverrR [31]

Answer:

Sam’s Home Store can enforce the contract against Restore Construction Company

Explanation:

In contract law, only the parties involved in a contract can take action to enforce the contract. In this case Sam' Home Store signed the contract with Restore, so they can enforce it. Any third party beneficiaries from the contract, like United Building Supplies, are not entitled to enforce anything.

6 0
2 years ago
Rath Company provided the following information:
Anit [1.1K]

Answer:

The correct answer is $8,316( Unfavorable) and $10,500 ( Favorable).

Explanation:

According to the scenario, the computation of the given data are as follows:

Actual Variable OH  AH × SVOR              SH × SVOR

$222,816          $57,200×$3.75 = $214,500     $60,000×$3.75 = $225,000

  Variable OH spending variance        Variable OH efficiency variance                                

      $214,500 - $22,816)                              $225,000 - $214,500

    = $8,316( Unfavorable)                            = $10,500 ( Favorable)

Hence, Variable OH spending variance  =  $8,316( Unfavorable)

And Variable OH efficiency variance = $10,500 ( Favorable)

7 0
2 years ago
A firm with $900,000 in sales, cash on hand of $1,150,000, liabilities of $400,000 and total assets of $2 million has a total as
notsponge [240]

Answer:

0.45

Explanation:

Total Asset turnover is the relationship between the total asset and the total sales.  It measure the turnover generated by assets and shows how fully a company is utilizing its assets.

It is calculated as  Net Sales / Average Total asset.

Average total asset is calculated as  Asset at Beginning  + Asset at closing / 2

Applying the formula

The total sales = $900,000  while the total asset is $2, 000,000

$900,000/$2,000,000 =  0.45

Note: The beginning and closing Asset were not given so $2,000,000 is regarded to as the average asset.

4 0
2 years ago
The tool crib at a large manufacturing company is responsible for providing tools to the factory workers on demand. The tool cri
Semmy [17]

Answer:

6.4 minutes

Explanation:

Average small tool per day = 445

 working hours = 8     so that is 8*60 =  (480 minutes)

Waiting time  =  

\frac{[445*(\sqrt{1} )]}{[2*[480-(445*1)]]}  (image of the operation on the attach file)

 =[445]/[(2*35)]

=445/70

=6.357 minutes

3 0
2 years ago
A growing car dealership would like to expand its market with online sales. To do this, they want to allow customers to put toge
Tpy6a [65]
Interactive media would be the best option, as customers could piece together their ideal vehicle right on screen. 
4 0
2 years ago
Read 2 more answers
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