A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing.

Protec Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is

taurus [48]

Answer:

The correct answer is 8.23%.

Explanation:

According to the scenario, the computation can be done as:

WACC of debt = Respective costs of debt× Respective weight of debt

= (0.4 × 5)

= 2

WACC of preferred = Respective costs of preferred × Respective weight of preferred

= (0.15 × 7)

= 1.05

WACC of common equity = Respective costs of common equity × Respective weight of retained earning

= (0.45 × 11.5)

= 5.175

So, Total WACC = WACC of debt + WACC of preferred + WACC of common equity

= 2 + 1.05 + 5.175

= 8.225 or 8.23 (approx.)

3 0

2 years ago

A service contract for a video projection system costs $70 a year. you expect to use the system for five years. instead of buyin

lukranit [14]

<span>The value of $70.00 invested each year for five years, at an annual interest rate of 3% is as follows, and assumes the interest is left in the account at the end of each year. Principal Interest balance at end of year Year 1 $ 70.00 $ 2.10 $ 72.10 Year 2 $142.10 $ 4.20 $146.30 Year 3 $216.30 $ 6.49 $222.79 Year 4 $292.79 $ 8.79 $301.58 Year 5 $371.58 $11.14 $382.72 - final value at the end of five years</span>

8 0

2 years ago

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. if they then still sel

Ierofanga [76]

The answer would be that there are few other places to purchase soda on campus; competition (or lack thereof) can play a big factor in determining price elasticity.

While nutrition information can shift consumers' preferences, we have no indication within the question of whether or not the students are well-informed of the impact of their drinking choices.

As for the third option, we are not given any information on the students' budgets, and no information with which to infer this, either. We only have information on their spending as it is related to soda, not as compared to other purchases.

Finally, given that the quantity sold does not change much despite the change in price, we can conclude that this price curve is relatively inelastic, in which case the price elasticity of demand would be closer to zero than one. This effectively rules out the last answer.

8 0

2 years ago

Steve's basis in his SAW Partnership interest is $200,000 at the beginning of the tax year, including all adjustments. His alloc

LiRa [457]

This is true...........

4 0

2 years ago

Read 2 more answers

The manager of a canned-food processing plant has two labeling machine options. On the basis of a rate of return analysis with a

GREYUIT [131]

The manager of a canned-food processing plant has two labeling machine options. on the basis of a rate of return analysis with a marr of 20% per year, determine (a) which model is economically better, and (b) if the selection changes, provided both options have a 4-year life and all other estimates remain the same.

Answer:

The answer is below

Explanation:

First, compare the present values (PV) of all the expenses of all the investments to make an investment decision.

Given the formula of PV = ((C1/(1+r)1) + ((C2/(1+r)2) + ((C3/(1+r)3) +…….+ ((Cn/(1+r)n) + present value of investment – present value of the salvage value

Where, Cn equals to the expense incurred in the nth period and r is the rate of interest per period.

Therefore, for Machine A, present value of the expenses is

= ((1600/(1+0.20)1) + ((1600/(1+0.20)2) + 15,000 – ((3000/(1+0.20)2)

= 1333.33 + 1111.11 + 15000 – 2083.33

= 15361.11

For Machine B, present value of the expenses is

= ((400/(1+0.20)1) + ((400/(1+0.20)2) + ((400/(1+0.20)3) + ((400/(1+0.20)4) + 25,000 - ((4000/(1+0.20)2)

= 333.33 + 277.77 + 25,000 – 2777.77

= 22833.33

Therefore, it is shown that, Machine A is the least cost alternative and should be selected.

5 0

2 years ago