BUSINESS COLLEGE

AllCity, Inc., is financed 39 % with debt, 11 % with preferred stock, and 50 % with common stock. Its cost of debt is 6.1 %, its preferred stock pays an annual dividend of $ 2.53 and is priced at $ 33. It has an equity beta of 1.11. Assume the risk-free rate is 2.2 %, the market risk premium is 6.7 % and AllCity's tax rate is 35 %. What is its after-tax WACC?

Answers

Answer 1

Answer:

Answer:

Cost of debt (Kd) = 6.1%

Cost of preferred stock = Dividend paid

Current market price

= $2.53

$33

= 0.0767 = 7.67%

Risk-free rate (Rf) = 2.2%

Beta (β) = 1.11

Market risk premium (Rm - Rf) = 6.7%

Cost of equity (Ke) = Rf +β(Rm - Rf)

Cost of equity (Ke) = 2.2 + 1.11(6.7)

Cost of equity (Ke) = 9.637%

WACC = Kd(D/V)(1-T) + Kp(P/V) + Ke(E/v)

WACC = 6.1(39 /100)(1 -0.35) + 7.67(11/100) + 9.637(50/100)

WACC = 1.55 + 0.84 + 4.82

WACC = 7.21%

Explanation:

In this case, cost of debt has been given. Cost of preferred stock is calculated as current dividend paid divided by current market price.

Cost of equity is calculated based on capital asset pricing model, which is Risk-free rate plus beta multiplied by the market risk premium.

WACC equals after-tax cost of debt multiplied by the proportion of debt in the capital structure plus cost of preferred stock multiplied by the proportion of preferred stock in the capital structure plus cost of equity multiplied by proportion of equity in the capital structure.

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Which of the following is not an important question to ask when developing a data collection plan?a. Who will be responsible for collecting the data?b. What is the source of the data?c. What is the reason for collecting the data?d. Is it possible to make decisions without collecting data?
Nevada Corporation has 64,700 shares of $17 par stock outstanding that has a current market value of $140. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be:
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Part Three: Neighboring WSU dropped their tuition and fees by 14 percent and TTA saw enrollment fall from 8,400 to 7,400. What is the cross elasticity between the two schools.?

Answers

Answer:

0.85

Explanation:

Given that

Dropped percentage of tuition and fees = 14%

Enrollment fall from 8,400 to 7,400

So, the cross elasticity between the two schools is

= Percentage change in quantity demanded of one good ÷ Percentage change in price of another good

where,

Percentage change in quantity demanded of one good equals to

= ($7,400 - $8,400) ÷ ($8,400)

= -11.9%

And, the percentage change in price of another good is -14%

So, the cross elasticity is

= -11.9% ÷ -14%

= 0.85

A small manufacturer that makes clothespins and other household products buys new injection molding equipment for a cost of $500,000. This will allow the manufacturer to make more clothespins in the same amount of time with an estimated increase in sales of 25%. If the manufacturer currently makes 75 tons of clothespins per year, which sell at $18,000 per ton, what will be the increase in revenue next year from the new equipment?A) $837,500
B) $303,750
C) $125,000
D) $337,500

Answers

Answer:

The correct answer is D.

Explanation:

Giving the following information:

New injection molding equipment for a cost of $500,000.

Increase in sales of 25%.

The manufacturer currently makes 75 tons of clothespins per year, which sell at $18,000 per ton.

First, we need to calculate the new sales level:

New sales (units)= 75t* 1.25= 93.75 tons

Increase in sales (dollars)= (93.75 - 75)*18,000= $337,500

Avon was known as the company that sold cosmetics door-to-door for a long time. In order to grow and reach new markets it began to sell jewelry through its door-to-door sales force. This involved marketing new products through existing channels of distribution. It also is now selling its products by mail order and has opened retail stores. Avon is an example of a company effectively using which strategy? A. product development strategy
B. diversification strategy
C. market penetration strategy

Answers

the answe is deffffffffff a

Final answer:

Avon is effectively using the diversification strategy by expanding its product offerings and distribution channels.

Explanation:

Avon is an example of a company effectively using the diversification strategy. Diversification involves entering new markets or offering new products to reach a broader range of customers. Avon expanded its product offerings from cosmetics to jewelry and adopted various distribution channels such as door-to-door sales, mail order, and retail stores to reach different customer segments.

Learn more about Diversification strategy here:

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#SPJ2

New York Times Co. (NYT) recently earned a profit of $1.21 per share and has a P/E ratio of 19.59. The dividend has been growing at a 7.25 percent rate over the past six years. If this growth rate continues, what would be the stock price in five years if the P/E ratio remained unchanged

Answers

Answer:

If the growth rate continues, the stock in 5years if the P/E ratio remains unchanged will be $33.64.

Explanation:

Given

Profit/share (Eo) = $1.21

Percentage growth (g) =7.25%

Number of years = 5 years

To find stock price, we use the formula:

$P_n = [P/E] * E_0 * [1 + g]^n$ ;

So, we have

$P_5 = 19.59 * $1.21 * [1 + 0.0725]^5$

= $33.64

Therefore, If the growth rate continues, the stock in 5years if the P/E ratio remains unchanged will be $33.64.

Simba Company’s standard materials cost per unit of output is $10.00 (2.00 pounds x $5.00). During July, the company purchases and uses 3,200 pounds of materials costing $16,192 in making 1,500 units of finished product. Compute the total, price, and quantity materials variances. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.)

Answers

The quantitative assessment of the discrepancy between planned and actual behavior is known as variance analysis. This study is utilized to keep a corporationunder control by looking into areas where performance has been surprisingly bad.

Note:

Standard cost = SC

Actual cost = AC

Standar rate = SR

Actual rate = AR

Standard Quantity = SQ

Actual Quantity = AQ

Material Cost Varience = MCV

Material Rate Varience = MRV

Material Usage Variance = MUV

1) Computation of Material Cost Variance (MCV)

$\text{MCV = SC -AC}$

$= 1,500$ × $2 = 3,000$

$\text{SC = 3,000}$ × $5$ $= 15,000$

$\text{AC ( Pounds of material costing)} = 16,192$

$\text{MCV} = 15,000 - 16,192$

$\text{MCV} = 1,192 (A)$

2) Computation of Material Rate Variance (MRV)

$\text{MRV = (SR-AR) AQ}$

$\text{AR} = 3,200$

$\text{SR} = 5$

$\text{AR} = (16,192)/(3200)$

$\text{AR} = 5.06$

$\text{MRV} = (5-5.06) 3,200\n\ntext{MRV} = 192 (A)$

3) Computation of Material Usage Variance (MUV)

$\text{MUV} = \text{ (SQ-AQ) SR)}\n\n\text{SQ} = 1,500 \text{ X } 2 = 3,000\n\n\text{MUV} = (3,000 -3,200) \text{ X } 5$

$\text{MUV} = 1,000 (A)$

For more information regarding variance costing sums, refer to the link:

brainly.com/question/14976139

Answer:

A)1192 A

B) 192 A

C) 1000 A

Explanation:

The Question is to Compute Simba Company's Total, Price, and Quantity materials Variances

1) Computation of material Cost Variance

= The Standard Cost - The Actual Cost of the material

= 1,500 units x 2 pounds = 3000 pounds

Standard Cost = 3,000 pounds x $5 = $15,000

Therefore material variance = $15,000 - $16,192 = 1192A

2) The material Rate Variance or the Price Variance

= (Standard Rate - Actual Rate) Actual Quantity

= Actual Rae = $16,192 / 3200 = $5.06

Material Rate Variance = (5- 5.06) x 3,200

= 192 A

3) The material Usage Variance or Quantity variance

= (The Standard Quantity - Actual Quantity) Standard Rate

Standard Quantity = 1,500 Units x 2 Pounds = 3000 pounds

Material Usage Variance = (3,000-3,200) 5

= 1000 A

The adjusted trial balance of Sunland Company shows these data pertaining to sales at the end of its fiscal year, October 31, 2022: Sales Revenue $903,400; Freight-Out $13,700; Sales Returns and Allowances $22,000; and Sales Discounts $15,400. Prepare the sales section of the income statement.