Answer:
c
Explanation:
Required reserves is the percentage of deposits required of banks to keep as reserves by the central bank
Required reserves = reserve requirement x deposits
0.2 x $100,000 = $20,000
Excess reserves is the difference between reserves and required reserves
Required reserves = 0.15 x 600 = 90
Excess reserves = 600 - 90 = 510
The calculation of the payback period for an investment when net cash flow is uneven is:
Answer:
Determining when the cumulative total of net cash flows reaches zero.
Explanation:
PLEASE HELP FAST!!!!!!!!!!!!!!!!!
Which candidate do you think proposed a more compelling argument about inflation? Support your claim with specific data presented by the candidates. Be sure to mention at least one counterpoint, and refute this point with evidence.
Answer:
What type of canidate? Like ones running for presidents?
This is your opinion and backup your beliefs with evidence
Explanation:
Answer:
I think the more compelling argument winner has to go to Jimmy Carter. Lots of facts stated, not just opinions and assumptions. For example; when he stated written facts from the CPI that his plan to bring inflation down has worked for him during is presidency.
With that being said I have to give credit where credit is due, Ronald Regan definitely had some powerful comebacks. Like for when he was showing that his governing in the state of California has worked in the past so why would it not work while running the country.
Explanation: no explination
plus not my answer
Wildhorse Company issued $500,000, 5%, 20-year bonds on January 1, 2020, at 102. Interest is payable annually on January 1. Wildhorse uses straight-line amortization for bond premium or discount. (a) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
A. Dr Cash $510,000
Cr Bonds Payable $500,000
Cr Premium on Bonds Payable $10,000
B. Dr Interest expense $24,667
Dr Premium on bonds payable$333
Cr Interest Payable $25,000
C. Dr Interest Payable $25,000
Cr Interest Expense $25,000
D. Dr Bond payable $500,000
Cr Cash $500,000
Explanation:
(a) Preparation of the journal entry to record the issuance of the bonds
Dr Cash $510,000
($500,000 x 1.02 = $510,000)
BCr BondsPayable $500,000
Cr Premium on Bonds Payable $10,000
($510,000-$500,000)
(To record the issuance of the bonds)
B. Preparation of the journal entry to record Accrual of interest and the premium amortization
Dr Interest expense $24,667
($25,000-$333)
Dr Premium on bonds payable$333
($10,000/30)
Dr Interest Payable $25,000
($500,000*5%)
(To record Accrual of interest and the premium amortization)
C. Preparation of the journal entry to record the payment of interest
Dr Interest Payable $25,000
($500,000*5%)
Cr Interest Expense $25,000
(To record the payment of interest)
D. Preparation of the journal entry to record the bonds at maturity
Dr Bond payable $500,000
Cr Cash $500,000
(To record the bonds at maturity)
5 Julie is having a hard time convincing her husband, Eric, to do a budget. His income is $35,000, but he also works a part-time job so he has extra spending money. They have credit card debt and some minor medical bills. Julie wants to get out of debt, but Eric thinks that everything is fine. Julie calls Dave on the air to discuss her situation. What does Dave tell her
they need to do need analysis of what they want and go through their budget
Explanation:
he needs to analyse the expenses, income,the balance their are left with
Why is efficiency an important economic goal?
Explanation:
Efficiency reduces hunger and malnutrition because goods are transported farther and quicker. Also, advances in efficiency allow greater productivity in a shorter amount of time. Efficiency is an important attribute because all inputs are scarce.
Efficiency is an important Economic goal because it reduces the cost of production, gives highest output with less input and aims at minimum wastage of resources which in return reduces cost of goods and services for consumers.
What is Efficiency?Efficiency is the maximum level of performance that requires the fewest inputs and produces the greatest amount of output.
Economic efficiency is the distribution or allocation of all goods and factors of production in an economy to their most valued uses while reducing or eliminating waste.
What is Economic goal?Every country in the globe strives to achieve specific goals in order to become an ideal and stable economy. Countries put a lot of effort towards achieving these objectives. Every nation faces unique problems brought on by many variables that impede its development and expansion.
Hence, governments try to retain certain targets and seek to reach a given degree of growth within a year. These objectives are known as macroeconomics objectives or Economic goal.
Economic growth, full employment, price stability, economic freedom, equity, efficiency, stable financial market are some of the Economic goals that a country strive to achieve to grow and develop as whole.
scarcity is one of the important factor that impacts the growth of the country and its goals. A type of resource's scarcity can reduce profitability, slow economic growth, and raise prices. Businesses modify their operations to be as effective as feasible given their conditions using their understanding of a resource's scarcity. efficiency plays vital role in using those scarce resources to produce more output, in this way efficiency is very useful and important in a country to achieve its economic goals.
Supporting answer
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Given the restrictions on collusion in the US, what techniques do Oligopoly firms use to stay
competitive and in business?
DONT TYPE ANSWER HERE?
Type the answer at this phone number in messages 682-245-3720 and when done type m here and I will give you brainlest
do you want the answer or people's numbers
Banks offer various types of accounts, such as savings, checking, certificate of deposits, and money market, to attract customers as well as meet their specific needs.
a. True
b. False
Answer:
it's false.. because those are not the various types of account.
The master budget at Western Company last period called for sales of 225,000 units at $9 each. The costs were estimated to be $3.75 variable per unit and $225,000 fixed. During the period, actual production and actual sales were 230,000 units. The selling price was $9.10 per unit. Variable costs were $4.50 per unit. Actual fixed costs were $225,000. Required: Prepare a sales activity variance analysis
Answer:
Sales volume variance $26,250 Favorable
Explanation:
The sales volume variance is calculated as the difference between the budgeted and the actual sales volume multiplied by he standard contribution per unit
Units
Budgeted sales units 225,000
Actual sales units 230,000
Sales volume 5,000 favorable
Standard contribution(9-3.75) × $5.25
Sales volume variance $ 26,250
Sales volume variance $26,250 Favorable
Note standard contribution = standard selling price - standard variable cost
I am currently stuck on an application question on why I left my job. How would I awswer this question if I worked at an amusement park for two summers but left the first time because of ride issues and bronchitis/ and the second time I left due to drivers ed interfering with my work schedule, including not being able to get to and from work. Thank you for your time.
Answer:
Give the reasons that you wrote
Explanation:
If I were you I would put the reasons that you wrote above but just make it sound more professional. Ex: I left my job at (name of amusement park) in (month) of (year) due to health issues.
Freight Terms Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. If required, round the answers to the nearest dollar. Merchandise (Invoice Amount) Freight Paid by Seller Freight Terms Returns and Allowances (Invoice Amount) a. $6,700 $100 FOB destination, 2/10, n/30 $1,750 b. 3,300 200 FOB shipping point, 1/10, n/30 1,200 a. $fill in the blank 1 b. $fill in the blank 2
Answer and Explanation:
The computation of the amount is shown below:
a. For FOB destination
= Merchandise price - Returns and allowances - discount
= $6,700 - $1,750 - ($6,700 - $1,750 )× 2%
= $6,700 - $1,750 - $99
= $4,851
b. For FOB shipping point
= Merchandise price - Returns and allowances - discount + Freight In
= $3,300 - $1,200 - ($3,300 - $1,200) × 1% + $200
= $3,300 - $1,200 - $21 + $200
= $2,279
The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $218,000. Sales (58,000 units) $ 986,000 Costs: Direct materials $ 160,800 Direct labor 240,800 Fixed factory overhead 104,000 Variable factory overhead 150,800 Fixed marketing costs 110,800 Variable marketing costs 50,800 818,000 Pretax income $ 168,000
Answer:
See below
Explanation:
Given the above information, we need the below formula to start with.
Break even point = Fixed costs / Contribution margin
Price = $986,000 / 58,000 = $17
Variable cost = Direct material + direct labor + variable moh + variable marketing costs
= $160,800 + $240,800 + $150,800 + $50,800
= $603,200
Unitary variable cost = $603,200 / 58,000 = $10.4
Fixed costs = Fixed moh + fixed market
= $104,000 + $110,800
= $214,800
Profit = $218,000
Break even point = ($214,800 + $218,000) / ($17 - $10.4)
= $432,800 / $6.6
= 65,576 units
On January 1, 2020, Franchisee Inc. enters into a contract with Italian Fine Dining Inc. for the right (beginning immediately) to operate an Italian Fine Dining restaurant and receive on-going consulting services for a four-year period. The upfront fee of $100,000 also includes specialized equipment for $12,000. The standalone selling price of the franchise services and specialized equipment are $88,000 and $12,000, respectively. The equipment (with a cost of $9,000) was transferred to the franchisee on March 1, 2020. Determine the amount of revenue to recognize for Italian Fine Dining Inc. on December 31, 2020. Group of answer choices
Answer: $22,000
Explanation:
The total revenue to be recognized by Italian Fine Dinning Inc. is the standalone selling price for the franchise services which is $88,000.
As this contract is for a four year period, Italian Fine Dinning Inc will have to recognize the above revenue over a period of 4 years.
Revenue in December 2020 will therefore:
= 88,000 / 4
= $22,000
Who is responsible for protecting the environment?
a.
Government
b.
Employers
c.
Employees
d.
Everyone
Answer:
Answer D
Explanation:
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Item8 10 points eBookPrintReferencesCheck my workCheck My Work button is now enabledItem 8 You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Pay $660 per month for 25 months and an additional $12,000 at the end of 25 months. The dealer is charging an annual interest rate of 24%. Make a one-time payment of $18,850, due when you purchase the car. 1-a. Determine how much cash the dealer would charge in option (a). (Round your answer to 2 decimal places.) 1-b. In present value terms, which offer is clearly a better deal
Answer:
1. a. $20,199.85
b. One time payment of $18,850.
Explanation:
1. a. Find the present value of $660 per month (annuity) and $12,000 at the end of 25 months.
Period = 25 months
Interest = 24% / 12 months = 2%
Present value of annuity = 660 * ( 1 - (1 + 2%) ⁻²⁵) / 2%
= $12,885.48
Present value of $12,000 at end of 25 months.
= 12,000 / ( 1 + 2%)²⁵
= $7,314.37
Present value = 12,885.48 + 7,314.37
= $20,199.85
1.b. Making a one time payment of $18,850 is the better deal.
The use of slang creates which type of communication barrier?
A.
language barriers
B. wrong communication channel
C.
receiver inattention
D.
inadequate feedback
E.
unclear words
Answer:
letter A just my suggestion ☺️☺️
Consider three investment plans at an annual rate of 9.38%.
Investor A: Invest $2000 per year for the first 10 years of your career. After that, make no further investments, but reinvest the amount accumulated for the next 31 years.
Investor B: Do nothing for the first 10 years. Then start investing $2000 per year for the next 31 years.
Investor C: Invest $2000 per year for the entire duration.
Note that all investments are made at the beginning of each year, the first deposit will be made today at the beginning of age 25 (n=1), and you want to calculate the balance at age of 65 (n=41).
Answer:
Investor A = $545216 .
Investor B = $352377
Investor C = $897594
Explanation:
Annual rate ( r ) = 9.38%
N = 41 years
Calculate the balance at age of 65
1) For Investor A
balance at the end of 10 years
= $2000 (FIA, 9.38 %, 10) (1 + 0.0938) ≈ $33845
Hence at the end of 65 years ( balance )
= $33845 (FIP, 9.38 %, 31) ≈ $545216 .
2) For investor B
at the age of 65 years ( balance )
= $2000 (FIP, 9.38%, 31) = $322159 x (1 + 0.0938) ≈ $352377
3) For Investor C
at the age of 65 years ( balance )
= $2000 (FIP, 9.38%, 41) = $820620 x (1 + 0.0938) ≈ $897594
I'm struggling so bad with everything please help I'm so desperate
Ted works for Azure Motors, an automobile dealership. All employees can buy a car at the company's cost plus 2%. The company does not charge employees the $300 dealer preparation fee that nonemployees must pay. Ted purchased an automobile for $29,580 ($29,000 $580). The company's cost was $29,000. The price for a nonemployee would have been $33,900 ($33,600 $300 preparation fee). What is Ted's gross income, if any, from the purchase of the automobile
Answer:
$240
Explanation:
The computation of the ted gross income is given below;
But before that the following calculations need to be done
The discount would be
= $33,600 - $29,580
= $4,020
There is a service of $300 out of which 80% represent the gross income
So the gross income would be
= 80% of $300
= $240
Hence, the gross income of Ted is $240
IKEA has essentially changed the way people shop for furniture. Discuss the pros and cons of this strategy, especially as the company plans to continue to expand in places like Asia and India.
Answer:
um
Explanation:
During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholders’ equity. The articles of incorporation authorized the issue of 8 million common shares, $1 par per share, and 1 million preferred shares, $50 par per share.
Required:
Prepare the appropriate journal entries to record each transaction.
Feb. 12 Sold 2 million common shares, for $9 per share.
Feb 13 Issued 40,000 common shares to attorneys in exchange for legal services.
Feb 13 Sold 80,000 of its common shares and 4,000 preferred shares for a total of $ 945,000
Nov. 15 Issued 380,000 of its common shares in exchange for equipment for which the cash price was known to be $3,688,000.
Answer:
Date Account Title Debit Credit
Feb 12 Cash $18,000,000
Common Stock $2,000,000
Paid in Capital in excess of Com- $16,000,000
mon stock par value
Working
Cash = 2 million shares * $9 = $18,000,000
Common stock = 2 million * $1 par value = $2,000,000
Date Account Title Debit Credit
Feb 13 Legal expenses $360,000
Common Stock $40,000
Paid in Capital in excess of Com- $320,000
mon stock par value
Working
Cash = 40,000 shares * 9 = $360,000
Common Stock = 40,000 * 1 = $40,000
Date Account Title Debit Credit
Feb 13 Cash $945,000
Common stock $80,000
Preferred Stock $200,000
Paid in Capital in excess of Com- $640,000
mon stock par value
Paid in Capital in excess of Pre- $25,000
ferred stock par value
Working:
Common stock = 80,000 shares * 1 = $8,000
Preferred stock = 4,000 shares * $50 = $200,000
Paid in Cap, Common = 80,000 * (9 - 1) = $640,000
Date Account Title Debit Credit
Nov. 15 Equipment $3,688,000
Common Stock $380,000
Paid in Capital in excess of Com- $3,308,000
mon stock par value
Working:
Common stock = 380,000 * $1 = $380,000
Which of the following statements correctly explains Net present value: is the best method of analyzing mutually exclusive projects. is very similar in its methodology to the average accounting return. cannot be applied when comparing mutually exclusive projects. is less useful than the internal rate of return when comparing different-sized projects. is the easiest method of evaluation for nonfinancial managers.
Answer:
is the best method of analyzing mutually exclusive projects
Explanation:
The net present value would be considered the best method of capital budgeting to evaluate projects.
Also, it considers the time value of money. It represent to be a good indicator of firm profitability and rise the shareholder wealth.
So according to the given options, it would be considered the best method for analyzing the projects that are mutually exclusive
hence the first option is correct
what is market management
Answer:
Marketing management is the organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's marketing resources and activities.
Answer:
Marketing management is the organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's marketing resources and activities.
briefly describe the term budget
Answer:
A budget is a financial plan for a defined period, often one year. It may also include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities, and cash flows. Companies, governments, families, and other organizations use it to express strategic plans of activities or events in measurable terms.
Under the retrospective approach to accounting for changes in accounting principles, Multiple select question. prior years' financial statements are revised to reflect the impact of the new accounting principle change. a journal entry is made to adjust asset accounts to what their balances would have been had the new method been used in the current year forward. a journal entry is made to adjust all balance sheets accounts to what they would have been if the new method had always been used. only the current year and future financial statements are revised to reflect the impact of the accounting principle change. a journal is made to adjust the firm's Retained earnings balance to reflect the cumulative effect of the accounting principle change.
Answer:
Under the retrospective approach to accounting for changes in accounting principles,
a journal is made to adjust the firm's Retained earnings balance to reflect the cumulative effect of the accounting principle change.
Explanation:
A change in an accounting principle refers to a change in the accounting method. An example is using a different depreciation method (straight-line instead of double-declining method) or switching between Weighted-Average to LIFO inventory valuation method. Where there is a change in accounting principle, the change is applied retrospectively to the earliest period when financial statements are presented. The purpose is to ensure that the comparative financial statements reflect the new application of the accounting principle just as the current financial statements do. However, this cannot be done if it were impractical.
Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of .8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk ratios for Stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, Stock Y is and Stock Z is :__________. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
The reward-to-risk ratios for Stocks Y and Z are 7.22 and 5.50 percent, respectively. Since the SML reward-to-risk is 6.70 percent, Stock Y is undervalued and Stock Z is overvalued.
Explanation:
Market risk premium is 6.7%
Reward-to-risk ratio of Stock = (Expected return of the Stock - Risk-free rate) / Beta of the Stock
Using equation (1), we therefore have:
Reward-to-risk ratio of Stock Y = (18.2% - 5.2%) / 1.8 = 7.22%
Reward-to-risk ratio Stock Z = (9.6% - 5.2%) / 0.8 = 5.50%
Since the β of the market is one, it implies that SML reward-to-risk is 6.70 perecent.
Therefore, we have:
The reward-to-risk ratios for Stocks Y and Z are 7.22 and 5.50 percent, respectively. Since the SML reward-to-risk is 6.70 percent, Stock Y is undervalued and Stock Z is overvalued.
Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company.
Jan. 1 Inventory 100 units at $5 each
Jan. 4 Sale 80 units at $8 each
Jan. 11 Purchase 150 units at $6 each
Jan. 13 Sale 120 units at $8.75 each
Jan. 20 Purchase 160 units at $7 each
Jan. 27 Sale 100 units at $9 each
Fong Sai-Yuk uses the FIFO cost flow assumption. All purchases and sales are on account.
Required:
a. Assume Fong Sai-Yuk uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.
b. Compute gross profit using the periodic system.
c. Assume Fong Sai-Yuk uses a perpetual system. Prepare all necessary journal entries.
d. Compute gross profit using the perpetual system.
Answer:
Fong Sai-Yuk Company
a. Journal Entries:
Debit Purchases $2,020
Credit Accounts payable $2,020
To record purchases of goods on account for the month.
Debit Accounts receivable $2,590
Credit Sales revenue $2,590
To record the sale of goods on account for the month.
Debit Sales revenue $2,590
Credit Income Summary $2,590
To close the account to the income summary.
Debit Income Summary $2,790
Credit Purchases $2,020
Credit Ending Inventory $770
To close the accounts to the income summary.
b. Computation of the Gross Profit using the periodic system:
Sales revenue $2,590
Cost of goods:
Opening inventory $500
Purchases 2,020
Less Ending inventory 770 1,750
Gross profit $840
c. Using the Perpetual system:
Journal Entries:
Jan. 4 Debit Accounts receivable $640
Credit Sales revenue $640
To record the sale of goods on account.
Jan. 4 Debit Cost of goods sold $400
Credit Inventory $400
To record the cost of goods sold.
Jan. 11 Debit Inventory $900
Credit Accounts payable $900
To record the purchase of goods on account.
Jan. 13 Debit Accounts receivable $1,050
Credit Sales revenue $1,050
To record the sale of goods on account.
Jan. 13 Debit Cost of goods sold $700
Credit Inventory $700
To record the cost of goods sold.
Jan. 20 Debit Inventory $1,120
Credit Accounts payable $1,10
To record the purchase of goods on account.
Jan. 27 Debit Accounts receivable $900
Credit Sales revenue $900
To record the sale of goods on account.
Jan. 27 Debit Cost of goods sold $650
Credit Inventory $650
To record the cost of goods sold.
Jan. 31:
Debit Income Summary $1,750
Credit Cost of goods sold $1,750
To close the account to the income summary.
Debit Sales Revenue $2,590
Credit Income Summary $2,590
To close the account to the income summary.
d. Computation of the gross profit:
Sales revenue $2,590
Cost of goods 1,750
Gross profit $840
Explanation:
a) Data and Calculations:
Date Description Units Unit Cost Unit Price Total Cost Total Revenue
Jan. 1 Inventory 100 $5 $500
Jan. 4 Sale 80 $8 $640
Jan. 11 Purchase 150 $6 900
Jan. 13 Sale 120 $8.75 1,050
Jan. 20 Purchase 160 $7 1,120
Jan. 27 Sale 100 $9 900
Total goods available 410 $2,520
Total goods sold 300 $2,590
Ending inventory 110
Using FIFO under periodic system:
Ending inventory = 110 * $7 = $770
Cost of goods sold = Cost of goods available minus cost of ending inventory
= $2,520 - $770
= $1,750
Using FIFO under perpetual system:
Cost of goods sold:
Jan. 4 Sale $400 (80 * $5)
Jan. 13 Sale 700 (20 * $5 + 100 * $6)
Jan. 27 Sale 650 (50 * $6 + 50 * $7)
Total cost of goods sold $1,750
Ending inventory = $2,520 - $1,750 = $770
Question 9 At the end of the quarter, a company did an adjusting entry to record the fact that $1,000 of Prepaid Advertising had been used up during the quarter. Which of the following items would be increased by this advertising adjusting entry? (check all that apply) 1 point Net Income Cash Cost of Goods Sold Prepaid Advertising SG&A Expense
Answer:
Sg&a expense
Explanation:
When you use up insurance, you debit advertising expense and credit prepaid advertising.
‘you don’t increase income since it’s an expense
it shouldon’t go thru cost of goods sold
you reduce not increase prepaid advertising
The Cole Beverage Company (CBC) has a soft drink product that has a constant annual demand of 3,600 cases per year. A case of this soft drink product from Supplier A costs CBC $4 and carrying cost is charged at 25% of purchase cost (that is, $1 per case per year). Ordering costs are estimated to be $32 per order placed. Based on these information, the Economic Order Quantity (EOQ) for this soft drink product is a. 480 b. 240 c. 120 d. Not enough information given to answer this question
Answer:
a. 480
Explanation:
The computation of the economic order quantity is given below:
[tex]EOQ = \sqrt{\frac{2\times annual \ demand \times ordering\ cost }{carrying \ cost}} \\\\= \sqrt{\frac{2\times 3600\times \$32}{\$1} }[/tex]
= 480 units
The carrying cost could be determined below:
= $4 × 25%
= $1
hence, the carrying cost is $1
Therefore the economic order quantity is 480
Thus, the correct option is a.
Jaheem's business sells a single product. The following information was gathered from Jaheem's records: Price $24.00 per unit Variable costs are 61% of sales price The company's fixed costs are $400,000 annually Current sales total is 41,000 units Target profit before tax $22,000 Budgeted sales total is 48,000 units By how much will profit increase with the sale of each unit in Jaheem's business
Answer:
See below
Explanation:
With regards to the above, Jaheem's business profit increase is calculated as
= Fixed cost + Desired profit/Contribution margin
Given that;
Fixed cost = $400,000
Desire profit = $22,000
Contribution margin = $9.4
= $400,000 + $22,000/($24 - $14.6)
= $422,000/$9.4
= $44,894
Therefore, increase on profit
= $44,894 - $22,000
= $22,894
You are given the following information for Huntington Power Co. Assume the company’s tax rate is 40 percent.
Debt:
7,000 6.2 percent coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 105 percent of par; the bonds make semiannual payments.
Common stock: 340,000 shares outstanding, selling for $52 per share; the beta is 1.08.
Market: 8 percent market risk premium and 4.2 percent risk-free rate.
What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
WACC %
Answer:
WACC= 5.76%
Explanation:
The weighted average cost of capital (WAAC) is the average cost of all the various sources of long-term finance used by a business weighted according to the proportion which each source of finance bears to the the entire pool of fund.
To calculate the weighted average cost of capital, follow the steps below:
Step 1: Calculate the cost of Debt
The yield to maturity to Maturity can be used to work out the cost of debt using the formula below:
YM =( C + F-P/n) ÷ ( 1/2× (F+P))
C- annual coupon,
F- face value ,
P- current price,
n- number of years to maturity
YM - Yield to maturity
C- 6.2%× 1000 =62 , P- 1.05×1000= 1,050, F- 1000
AYM = 62 + (1000-1050)/15 ÷ 1/2× (1000+1050)
= 58.66 ÷ 1025
Yield to maturity =5.7%
Cost of debt= 5.7%
Step 2: Calculate the cost of Equity
Using the CAPM , the cost of equity can be worked out as follows:
E(r)= Rf +β(Rm-Rf)
E(r) =? , Rf- 4.2%, Rm-8% β- 1.08
E(r) = 4.2% + 1.08×(8-4.2) = 8.3%
Cost of equity= 8.3%
Step 3: Calculate the market value of sources of finance
Market value of equity = 52×340,000= 17,680,000.00
Market value of debt = 7,000×1,000×105 = 735,000,000.00
Step 4: Calculate the WACC
Source cost Market value cost× market value
Equity 8.3% 17,680,000 1,467,440.00
Debt 5.7% 735,000,000 41,895,000.
752,680,000. 43,362,440.
WACC= (43,362,440/ 752,680,000) × 100
= 5.76%
WACC= 5.76%