Calculate the WACC for the following data: A company raised $100,000,000. $50,000,000 came from the sale of bonds which have a current yield of 8%. $25,000,000 came from the sale of common stock which has a cost equal to 9%. The final $25,000,000 came from the sale of preferred stock which has a cost equal to 10%. The company's tax rate is 30%.Question 32 options:

A)
7.55%

B)
9.17%

C)
9.00%

D)
8.00%

Answers

Answer 1
Answer:

Answer:

WACC = 7.55 %

so correct option is A) 7.55%

Explanation:

given data

company raised = $100,000,000

sale of bonds = $50,000,000

current yield = 8%

sale of common stock = $25,000,000

cost equal = 9%

sale of preferred stock =$25,000,000

cost equal = 10%

tax rate = 30%

to find out

WACC

solution

we get here WACC that is express as

WACC = ( Weight of debt × After tax cost of debt) + (Weight of equity × Cost of equity) + (Weight of preferred stock × cost of preferred stock)   ..................1

and cost of debt after tax will be

cost of debt after tax = 8% of ( 1 - 30%)

cost of debt after tax = 5.6%

and Weight of debt = (50000000)/(100000000) = 0.50

and Weight of equity =  (25000000)/(100000000) = 0.25

and Weight of preferred stock = (25000000)/(100000000) = 0.25

so WACC = ( 0.50 × 0.056 ) +  ( 0.25 × 0.09 ) +  ( 0.25 × 0.10 )

WACC = 0.0755

WACC = 7.55 %

so correct option is A) 7.55%


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Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q) 350
Revenue ($420.00q) $ 147,000
Expenses:
Wages and salaries ($11,500 $130.00q) 57,000
Supplies ($4.00q) 1,400
Equipment rental ($2,200 $25.00q) 10,950
Insurance ($3,900) 3,900
Miscellaneous ($510 $1.44q) 1,014
Total expense 74,264
Net operating income $ 72,736
Required:
During May, the company’s actual activity was 340 diving-hours. Compute the flexible budget of activity.

Answers

Answer:

operating income 84740.4

Explanation:

The flexible budget will work out the numbers for a level of activity of 340 units

Revenue $420 x 340 = 142,800

Wages and salaries $11,500 fixed component + $130 x 340 =  55,700

Supplies $4.00 x 340 = 1,360

Insurnace (fixed)   $3,900

Miscellaneous $510 fixed component + $1.44 x 340 = 999,6

Operating Income:

Revenues            142,800

total expenses   (58,059.6)  

operating income 84740.4

Harper, Inc. acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2017, for $210,000 in cash. The book value of Kinman’s net assets on that date was $400,000, although one of the company’s buildings, with a $60,000 carrying amount, was actually worth $100,000. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000. Kinman sold inventory with an original cost of $60,000 to Harper during 2017 at a price of $90,000. Harper still held $15,000 (transfer price) of this amount in inventory as of December 31, 2017. These goods are to be sold to outside parties during 2018. Kinman reported a $40,000 net loss and a $20,000 other comprehensive loss for 2017. The company still manages to declare and pay a $10,000 cash dividend during the year. During 2018, Kinman reported a $40,000 net income and declared and paid a cash dividend of $12,000. It made additional inventory sales of $80,000 to Harper during the period. The original cost of the merchandise was $50,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2018 fiscal year. Prepare all journal entries for Harper for 2017 and 2018 in connection with this investment. Assume that the equity method is applied.

Answers

Answer:

Harper investment      160,000

building over fair value 16,000

royalty over fair value  34,000

                         cash              200,000

----

2017 entries:

loss on Harper Investment  32,000

              Harper investment                32,000

---

Cash    4,000

              Harper investment                4,000

----

Unrealized gain 2,000

  Harper Investment 2,000

---

royalty over fair value 1,700

bulding over fair value 1,600

         harper investment          3,300

---

2018 entries:

Harper Investment 16,000

  Gain on Harper Investent 16,000

----

Cash    4800

              Harper investment                4800

----

Unrealized gain 1,600

  Harper Investment 1,600

---

royalty over fair value 1,700

bulding over fair value 1,600

         harper investment          3,300

Explanation:

400,000 x 40% = 160,000

40,000 increase infair value of building x 40% = 16,000

royalty 85,000 x 40% = 34,000

total equity value 200,000

payment of           200,000

no goodwill.

amortization:

building: 16,000 / 10 = 1,600

royalty: 34,000 / 20 = 1,700

2017

loss: 60,000 x 40% = (32,000)

dividends 10,000 x 40% = (4,000)

unrealized gain: it kept 15,000/90,000 = 0.1667 = 16.67%

90,000 - 30,000 = 30,000 gain x 16.67% = 5,000 unrealized gain

5,000 x 40% = 2,000

2018

income 40,000 x 40% = 16,000

dividends 12,000 x 40% = (4,800)

unrealized gain kept 30%

80,000 - 50,000 = 30,000 x 30% = 9,000

the company has 40% so 9,000 x 40% = 3,600 unrealized

as we recognize 2,000 before we adjust for the difference of 1,600

The leader of two postpartum women's support groups is interested in the depression levels of the women in her groups. She administers the Center for Epidemiologic Studies Depression Scale (CES-D) screening test to the members of her groups. The CES-D is a 20-question self-test that measures depressive feelings and behaviors durin the previous week. The mean depression level from the screening test for the 6 women in the first group is mu_1 = 16; the mean depression level for the 10 women in the second group is mu_2 = 12. Without calculating the weighted mean for the combined group, you know that the weighted mean is: Midway between 16 and 12 Closer to 16 than to 12 Closer to 12 than to 16 Compute the weighted mean. Enter your answer rounded to one decimal place. mu = The support group leader realizes that she should also screen for alcohol abuse, so she gives the women in her two groups the Michigan Alcohol Screening Test (MAST). The MAST is a 22-question self-test focusing on the use and abuse of alcohol. The first group has a mean score of mu_1 = 18. The second group has a mean score of mu_2 = 14. Compute the weighted mean. Enter your answer rounded to one decimal place. mu =

Answers

The mean depression level  for the first group is μ₁= 16.

The mean depression level for the second group is μ₂ = 12

The weighted mean is closer to 12 than to 16.

The calculated weighted mean  for  CES-D is 13.5

The calculated weighted mean  for  MAST is 17.25 ≈ 17.0 rounded to 17.

Calculating the weighted mean μ

μ=   (w1x1 + w2x2)/(w1+w2)      {where x1 =μ₁ and x2= μ₂ }

μ= 16×6 + 10×12/ 6+10

μ= 216/16

μ= 13.5

The first group has a mean score of μ₁= 18.

The second group has a mean score of μ₂ = 14

Calculating the weighted mean μ

{where x1 =μ₁ and x2= μ₂ ; w1= number of women in the first   group and w2= number of women in the second group}

μ=   (w1x1 + w2x2)/(w1+w2)      

μ= 18×6 + 14×12/ 6+10

μ= 276/16

μ= 17.25≈ 17

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ImpressMe Products embosses notebooks with school and corporate logos. Last year, the company’s direct labor payroll totaled $352,100 for 50,300 direct labor hours. The standard wage rate is $6.75 per direct labor hour. Calculate ImpressMe’s direct labor rate variance. (Round answer to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Answers

Answer:

Direct labor rate variance= $12,575 unfavorable

Explanation:

Giving the following information:

Last year, the company’s direct labor payroll totaled $352,100 for 50,300 direct labor hours. The standard wage rate is $6.75 per direct labor hour.

To calculate the direct labor rate variance, we need to use the following formula:

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 352,100/50,300= $7 per hour

Direct labor rate variance= (6.75 - 7)*50,300

Direct labor rate variance= $12,575 unfavorable

An investment offers to double your money in 30 months (don’t believe it). What rate per six months are you being offered? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answers

Answer:

The rate of change in 6 months is 14.87%

Explanation:

Let a be the amount that the money is multiplied in one month. We know that in 30 months it is multiplied by 2, so if we power a by 30 wew obtain 2:

a³⁰ = 2

Thus, 2 = a³⁰ = a⁶*⁵ = (a⁶)⁵

(here we use the propiety a^bc = (a^b)^c = (a^c)^b)

We can conclude that a⁶ = 2^(1/5) = 1.1487

The rate in 6 months is (1.1487-1)*100 = 14.87%

Answer:

14.86% every 6 months

Explanation:

Let the original amount be a

An investment offers to double your money in 30 months i.e. 2a in 30 months

Fv = Pv (1 + x)ⁿ

Fv future value (i.e. future value of the cash flow after a particular time period. )

Pv Present value

x interest

n number of compounding period

Fv = Pv (1 + x)ⁿ

2a = a (1 + x)^(30/6)

2^(1/5)= 1 + x

1.1486 = 1 + x

x = 0.1486 0r 14.86%

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic a. in the short run but not in the long run. b. in the long run but not in the short run. c. both in the short run and in the long run. d. neither in the short run nor in the long run.

Answers

Answer: a. in the short run but not in the long run

Explanation:

The Short Run is usually considered in Economics/ Business as a point in time where at least ONE factor of production is FIXED. This factor is usually the Factory because it is hard to change the capacity of a Factory in the Short run. For instance a wing might need to be constructed. Labour on the other hand is considered variable in the Short run though because more people can be hired and the people already hired can put in more overtime.

The Long Run is classified as a point where EVERY factor of production is Variable. There is enough time to even change the capacity of a Factory. So here even Factory is Variable.

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