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Dimas [21]
2 years ago
6

Here is some information about Stokenchurch Inc.: Beta of common stock = 1.2 Treasury bill rate = 4% Market risk premium = 7.5%

Yield to maturity on long-term debt = 6% Book value of equity = $440 million Market value of equity = $880 million Long-term debt outstanding = $880 million Corporate tax rate = 35% What is the company’s WACC?
Business
1 answer:
Juli2301 [7.4K]2 years ago
3 0

Answer:

8.45%

Explanation:

Firstly, we need to calculate cost of equity using capital asset pricing model:

Cost of equity = Risk-free rate + Beta x Market risk premium

                         = 4% + 1.2 x 7.5% = 13%

Then, The weight average cost of capital (WACC) is stated as:

WACC = Debt contribution to capital structure x Cost of debt x (1 - tax rate) + Equity contribution capital structure x Cost of equity

<em>Note: Debt and equity contribution is calculated using market values</em>

Putting all the number together, we have:

WACC = [880/(880+880)] x 6% x (1 - 35%) + [880/(880+880)] x 13% = 8.45%

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Answer: Option (A)

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Fair values mostly tends to exist for the marketable security but this in terms does not state that this method is applicable. For instance if investor tends to control the entity with the traded equity, therefore the investment is centralized and thereby, fair-value method of accounting is not being used.

Therefore, from the given options we can state that option (A) does not precisely describes the fair value method.

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A private pilot wishes to insure his airplane for$200,000. The insurance company estimates that a total loss will occur with pro
Finger [1]

Answer:

The answer is: $6,900

Explanation:

To determine how much the insurance company should charge, we must first calculate the amount of money they expect to pay:

  • total loss $200,000 x 0.002 = $400
  • 50% loss $100,000 x 0.01     = $1,000
  • 25% loss $50,000 x 0.1         = $5,000

                                                 Total  $6,400

If the insurance company expects to pay $6,400 per year, they will have to charge $6,900 ($6,400 + $500) to cover their expenses and earn a $500 profit.

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Bonnie is writing a growth plan for her bicycle repair shop. She wants to pay off the loan for the building she uses for her bus
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Answer:

Financial goals

Explanation:

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Identify key components of economic growth and explain how they function in an economy.
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Answer:

Explanation:

1) Employment

The development of human capital can play an important role in overcoming unemployment, which is one of the biggest problems of our age. One of the most important components of human capital is the most important education that gives people new knowledge, skills and abilities, or enhances their skills, indirectly increasing their productivity and income. The effects of education on economic development and unemployment levels have been studied by economists much later than in classical production factors. A more detailed analysis of the economic aspects of education has led to a better understanding of labor market revenues, organizational structures and economic development.

2) Industry sector and human development

The mobilization and increase of physical inputs such as labor, material capital and natural resources (the discovery of new natural resources, the shift of existing labor and capital resources across sectors, etc.) in the short-term and long-term impact on economic growth in the manufacturing process. Due to technological progress and more intensive use of human capital in the manufacturing process, the impact of increased productivity on economic growth and development occurs mainly in the medium and long term. Experience of different countries' economic development is a sustainable and sustainable economic growth

It mainly focuses on the development and technological progress of human capital.

3) Development of the agricultural sector

It is a complement to activities that involve land (farming) and animal husbandry for the purpose of acquiring agricultural, plant and animal products. Adequate and high-quality agricultural production, which is one of the main sources of nutrition and income for the population, contributes to human development, with a positive impact on people's health and wellbeing.

4) Trade, Investment Environment and Private Sector Development

There is a significant and significant relationship between the liberalization of trade and the business environment and human development. Economic development practices show that countries liberalizing their foreign trade regime, improving their business environment and opening up to foreign investments will gradually achieve higher human capital potential in parallel with this process. The emergence of a strong human capital reserve, while ensuring the sustainability of economic growth, can also lead to the process of economic growth turning into economic development.

In other words, a favorable business environment will increase human capital investment in the country by increasing the demand for quality labor resources.

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