You were hired as a consultant to the ABC Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of equity is 11.25%, and the tax rate is 40%. What is ABC's WACC

Answer:

8.15%

Explanation:

The weighted average cost of capital is the sum of costs of different  sources of finance multiplied by their respective weights as shown by the formula below:

WACC=(cost of equity*weight of equity)+(cost of preferred stock*weight of preferred stock)+(after-tax cost of debt*weight of debt)

cost of equity=11.25%

weight of equity=55%

cost of preferred stock=6.00%

weight of preferred stock=10%

after-tax cost of debt=6.50%*(1-40%)=3.90%

weight of debt=35%

WACC=(11.25%*55%)+(6.00%*10%)+(3.90%*35%)

WACC=8.15%

Jane's Donut Co. borrowed $198,000 on January 1, 2021, and signed a two-year note bearing interest at 11%. Interest is payable in full at maturity on January 1, 2023. In connection with this note, Jane's should report interest expense at December 31, 2021, in the amount of: Multiple Choice

An exchange economy has two consumers, named Jimmy and Sue, and two commodities, apples and bananas. Jimmy’s initial endowment is 2 units of apples and 4 unit of bananas. Sue’s initial endowment is 4 apples and 4 units of bananas. Jimmy’s utility function over apples and bananas is U(AJ, BJ) =AJ1/2 BJ1/2. Sue’s utility function is of the form U(AS, BS) =AS+BS, where AJ and BJ are the amounts of apples and bananas for Jimmy and AS and BS are amounts of apples and bananas for Sue.The equation of the contract curve in terms of Jimmy’s coordinates is:________

a. BJ= 2AJ
b. BJ=(A2J)/2
c. BJ=AJ
d. BJ= (8AJ)/(1+AJ)
e. None of the above

g The corporate charter of Imp Company authorized the issuance of 10 million, $1 par common shares. During 2021, its first year of operations, the company had the following transactions: January 1 sold 8 million shares at $15 per share June 3 purchased 2 million shares of treasury stock at $18 per share December 28 sold the 2 million shares of treasury stock at $20 per share What amount should the company report as additional paid-in capital in its December 31, 2021, balance sheet

The COM 341 Medical Supplies is in charge of maintaining hospital supplies at UVic Hospital. The lead time for replenishment deliveries is 6 days. It was calculated that the mean demand for a 3-day period was 60 units, with a standard deviation of 7 units. Please assume that demand follows a normal distribution. COM 341 Medical Supplies would like to maintain a 90% service level.

Required:
What is the appropriate reorder point?

An organization takes active countermeasures to protect its systems, such as installing firewalls. This approach is known as _____________ .

The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 8%. In addition, it has $600,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.88 million, its average tax rate is 30%, and its profit margin is 3%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places.

Suppose that you are a speculator that anticipates an appreciation of the Singapore dollar (S$). You purchase a call option contract on Singapore dollars. Each contract represents S$40,000, with a strike price of $0.69 and call option premium of $0.03 per unit. Suppose that the spot price of the Singapore dollar is $0.70 just before the expiration of the call option contract. At this time, you call the contract and immediately sell the Singapore dollars to a bank at the current spot price.

Fill in the following table from your (the buyer's) perspective.

Transaction Per Unit Per Contract
Selling price of $0.92 _________
- Purchase Price of 5$ -$0.86 _________
- Premium Paid for Option -$0.02 _________
Net profit _________ _________

On January 1, 2016, Belden, Inc. issued long-term notes payable for $50,000. The note will be paid over 10 years with payments of $5,000 plus 12% interest due each January 1, beginning January 1, 2017. Prepare the amortization schedule for the first three payments.

Consider the following production and cost data for two products, L and C: Product L Product C Contribution margin per unit $ 120 $ 112 Machine minutes needed per unit 10 minutes 8 minutes A total of 60,000 machine minutes are available each period and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period

Mekia is in high school. She is thinking about possible career choices. Her guidance counselor gave her information about several career possibilities. Which best describes information she may read about the Human Services career cluster?

a) Human Services careers have an above average rate of increase in the number of jobs.
b)Human Services careers have an average rate of increase in the number of jobs.
c)Human Services careers have a below average rate of increase in the number of jobs.
d)Human Services careers have experienced no change in the number of jobs over the last couple of years.

Question 1 Accounting for Construction Contracts 10 Marks
XYZ Ltd signs a contract on 30 June 2015, agreeing to build a bridge for ABC Limited at a
contract price of $40 million. XYZ Ltd estimates that construction costs will be as follows:
___________________________________________________
Year Ending Cost
___________________________________________________
30 June 2016 $10 000 000
30 June 2017 $16 000 000
30 June 2018 $ 6 000 000
$32 000 000
The contract provides that ABC will make payments on 30 June of each year as follows:
2016 $8 000 000
2017 $20 000 000
2018 $12 000 000
$40 000 000
XYZ now estimates at the beginning of the 2017 financial year that construction costs will be
as follows:
_________________________________________________
Year Ending Cost
___________________________________________________
30 June 2016 $10 000 000
30 June 2017 $21 000 000
30 June 2018 $15 000 000
$46 000 000
Required:
Calculate:
a) Percentage of completion for each of the three years. (4 marks)
b) Revenue to be recognised in each of the three years. (3 marks)
c) Gross profit/loss to be recognised in each of the three years. (3 marks)

On January 1, 2019, Cullumber Company had $1,000,000 of common stock outstanding that was issued at par. It also had retained earnings of $740,000. The company issued 35,000 shares of common stock at par on July 1 and earned net income of $390,000 for the year.

Required:
Journalize the declaration of a 14% stock dividend on December 10, 2020, for the following independent assumptions.
a. Par value is $10, and market price is $18.
b. Par value is $5, and market price is $20.

Suppose that an increase in the price of melons from $0.50 to $1.50 per pound increases the quantity of melons that melon farmers produce from 2 million pounds to 4 million pounds. The price elasticity of supply in this case indicates that supply is Group of answer choices

On November 1, 2015, Ybarra Construction Company issued $400,000 of 5-year bonds that pay interest at an annual rate of 5%. The interest payments are due every six months (that is, the interest is compounded semi-annually). At the end of the five-year period, Ybarra must pay the bond holders a balloon payment of $400,000. a. What would the issue price of the bonds be if the prevailing interest rate is: Round answers to the nearest whole number.

Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $112,000. The equipment will have an initial cost of $224,000 and have a 3 year life. If the salvage value of the equipment is estimated to be $87,000, what is the payback period

Assume that the quantity of X is measured on the horizontal axis, and the quantity of Y is measured on the vertical axis. Assume that the price of X is $60, the price of Y is $30 and Rafe has an weekly income of $180. Which of the following is true? He can afford 6 units of good Y. His budget line has a slope of 1/3. He can afford 6 units of good X. His budget line has a slope of −1/3.

Which account option may require larger money contributions than usual but offers a higher interest rate than traditional savings?
Certificate of deposit
Checking
Money market
Saning

What might you expect to find out about people who are described as credit risks?

A) They are usually given a low interest rate.
B) They have a history of not making their payments on time.
C) They find it easy to get a loan from the bank.
D) They have a history of paying in full each month.

You bought a share of Bavarian Sausage stock for $46.50 at the beginning of the year. During the year the stock paid a $2.75 dividend and at the end of the year it trades at $52.75. What is the total return of your stock investment

If we add successive laborers to work a given amount of land on a wheat farm, eventually:____.
a. the increases in wheat harvested will get larger and larger.
b. average total cost will fall to zero.
c. the increases in wheat harvested will rise at a constant rate.
d. the increases in wheat harvested will get smaller and smaller.

examples of veriable costs​

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Wireless Solutions reports operating expenses of $955,000. Operating expenses include both rent expense and salaries expense. Prepaid rent increases during the year by $27,000 and salaries payable increases by $18,500. What is the cash paid for operating expenses during the year

Tyrion considers taking a new job. He focuses on the increased opportunities for promotion and the higher salary rather than his increased responsibilities; therefore, he views the new position as a ________ rather than a ________. a. threat; challenge b. challenge; distress c. challenge; threat d. distress; eustress

What types of behaviors does the average customer exhibit

Ruby Red manufactures, markets, and distributes citrus flavored soft drinks across the globe. Ruby Red hired a collection agency in 2018 to increase collection rates from customers. As a result, Ruby estimates that only 2% of its 2019 credit sales will be written off, compared to the 4% of 2018's credit sales that were estimated to be uncollectible. At December 31, 2019, Ruby Red has a $12,800 credit balance in its allowance for doubtful accounts and credit sales of $1,570,000.

Required:
Use the percentage of credit sales method to calculate the bad debt expense.

Suppose you borrow $8,000 of principal that must be repaid at the end of two years, along with interest of 4 percent a year. If the annual inflation rate turns out to be 6 percent,
Instructions: Enter your responses rounded to the nearest whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.
a. What is the real rate of interest on the loan?
b. What is the real value of the principal repayment?
Hint: Future value = Present value × (1 + Growth in prices)t, where t is the number of years evaluated, e.g., The real value of loan repayment = Amount of loan × (1 + Real interest rate)t
c. Who loses, the debtor or the creditor?

Zwick Company bought 21,500 shares of the voting common stock of Handy Corporation in January 2021. In December, Handy announced $201,500 net income for 2021 and declared and paid a cash dividend of $9.00 per share on all 207,500 shares of its outstanding common stock. Zwick Company's dividend revenue from Handy Corporation in December 2021 would be:

If Serena runs her own business and is responsible for everything, she is a/an

e payoff matrix below shows the payoffs (in millions of dollars) for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital. Firm B Invest Not Invest Firm A Invest 20 for A 70 for A 20 for B 5 for B Not Invest 5 for A 50 for A 70 for B 50 for B Firm A’s dominant strategy is to ______, and Firm B’s dominant strategy is to ______.