A farmer plans to plant two crops, A and B. The cost of cultivating Crop A is $40/acre whereas the cost of cultivating Crop B is
1 answer:
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Answer:
A) Profit Margin, Barco = 23.8%, Kyan = 22.1%
B) Asset Turnover, Barco = 1.83, Kyan = 1.84
C) ROA, Barco = 44%, Kyan = 41%
D) ROE, Barco = 66%, Kyan = 61%
E) Price-Earnings Ratio, Barco = 17.12 times, Kyan = 16.67 times
F) Dividend yield, Barco = 5.1%, Kyan = 5.2%
2B) Barco is the good investment.
Explanation:
Requirement A to Requirement F - See Images Below
2B) Barco company's share is the best from the two companies. From the Return on Asset, Return on Equity, and Price-earnings ratio, it is clear that Barco company's share is an upper hand. For example, P/E ratio of Barco is 17.12 times while Kyan's P/E ratio is 16.67 times. Therefore, I would recommend Barco company's stock should be the better investment.
Answer: 9.03%.
Explanation:
Given: The Two Dollar Store has a cost of equity of 11.9 percent, the YTM on the company's bonds is 6.2 percent, and the tax rate is 40 percent.
Debt to equity ratio is .54
i.e.
Adding denominator to numerator on both the sides, we get,
i.e. Weighted equity =
From (i)
Adding denominator to numerator on both the sides we get,
Thus, weight of debt=
Now,
Weighted average cost of capital=(Weight of equity) × (cost of equity)+(Weight of debt)×(Cost of debt)×(1-tax rate)
Hence, the weighted average cost of capital is 9.03%.