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2 years ago

The Bigelow Company has a cost of equity of 12 percent, a pre-tax cost of debt of 7 percent, and a tax rate of 35 percent.

Business

1 answer:

algol [13]2 years ago

7 0

Answer:

B. 9.21 percent

Explanation:

The formula to compute WACC is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of common stock) × (cost of common stock)

where,

Weighted of debt = Debt ÷ total firm

The total firm includes debt, and the equity which equals to

= 0.60 + 1 = 1.60

So, Weighted of debt = (0.60 ÷ 1.60) =0.3 75

And, the weighted of common stock = (Common stock ÷ total firm)

= 1 ÷ 1.60

= 0.625

Now put these values to the above formula

So, the value would equal to

= (0.375 × 7%) × ( 1 - 35%) + (0.625 × 12%)

= 1.71% + 7.5%

= 9.21%

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Scott and his partner, Greg, have decided to update their computer network, although they have no expertise in this area. During

sweet [91]

Answer:

E. Rational decision making.

Explanation:

Rational decision making: It is a process of decision making that involve multi steps process of analysis, logic and knowledge of expert for decide on alternative. It does not favor insight or subjectivity in the process of decision making. Identifying a few possible courses of action is the first step involved in the rational decision-making process.

Steps that followed in rational decision making:

Define the problem.
Identify the decision criteria.
Allocate weights to the criteria.
Develop the alternatives.
Evaluate the alternatives.
Select the best alternative.

In the given case, during a meeting with Greg, Scott said "Our decision is limited by numerous constraints, such as our understanding of the complexity of technology, time and money, imperfect information, and our conflicting goals.", which are hindrance to Rational decision making.

4 0

2 years ago

Which situation is an example of comparative advantage in an international market?

Yanka [14]

Answer:

Explanation:

3 0

2 years ago

Read 2 more answers

Maryland Incorporated produces toys. Total manufacturing costs are $360,000 when 50,000 toys are produced. Of this amount, to

Aleonysh [2.5K]

Answer:

$458,000

Explanation:

The computation of the total production cost in case of 85,000 toys are produced

The fixed cost is

= Total manufacturing cost - total variable cost

= $360,000 - $140,000

= $220,000

And, the variable cost per unit is

= $140,000 ÷ 50,000 toys

= $2.8

So for 85,000 toys, the total production cost is

= Fixed cost + Variable cost × variable cost per unit

= $220,000 + 85,000 toys × $2.8

= $220,000 + $238,000

= $458,000

5 0

2 years ago

On January 1, 20Y8, Crabb & Co. sold land to ASP, Inc. and accepted a two-year, $500,000 face value note as payment. 6% inte

jeka94

Answer:

1. Discount

2. $449,298.47

3. $369,298.47 gain

4. land reduces by $80,000, investment increases by $449,298.47, reserves increases by $369,298.47

Explanation:

Question 1

Using the formula below

$Price=\frac{I_{1}}{1+r} +\frac{I_{2}+F}{(1+r)^{2}}$

where

I = interest rate, which is 6% of 500,000 = 30,000

F = Face value, 500,000

r = borrowing cost = 12%

Therefore, the price of the note at the time it was used for payment was

$Price=\frac{30,000}{1.12} +\frac{30,000+500,000}{(1.12)^{2}}$

= $449,298.47.

As the price is lower than the face value of the note, the note was issued at a discount.

Question 2

The fair market value of the note is $449,298.47, the compute price in question 1.

Question 3

The gain/loss on the sale of the land

= sale price - purchase price

= $449,298.47 - 80,000

= $369,298.47.

Question 4

The transaction would affect Crabb & Co's balance sheet as follows.

<em>Asset side:</em>

land reduces by $80,000

investment increases by $449,298.47

<em>Equity & liabilities side:</em>

reserves increases by $369,298.47

3 0

2 years ago

Vessels Corporation's net income for the most recent year was $2,532,000. A total of 200,000 shares of common stock and 200,000

Usimov [2.4K]

Answer:

The earnings per share of common stock is closest to

D. $11.41.

Explanation:

To find the Price-Earning Ratio first, it's necessary to deduct from the Net Income the part corresponding to Preferred Stock,

which is , $2,532,000 - (200,000*1,25= $250,000) = $2,282,000

Then we calculate the Earning/Share Ratio : $2,282,000/200,000 = 11,41

Shares of Common stock outstanding 200.000

Shares of Preferred stock outstanding 200.000*$1,25 = $250.000

NET INCOME Available $2,282,000 = $ 2,532,000 - $250,000

6 0

2 years ago