BUSINESS COLLEGE

A. 17.2, B. 15.12 C.12% D. 18.7%What would be the weighted average cost of capital for Lam Bakery, Inc. under the following conditions:

*The capital structure is 40% debt and 60% equity

*The before-tax cost of debt (which includes flotation costs) is 20% and the firm is in the 40% tax bracket

*The firm’s beta is 1.7

*The risk-free rate is 7% and the market risk premium is 6%

Answers

Answer 1
Answer:

Answer:

Option (B) is correct.

Explanation:

Cost of Equity (Ke) = Rf + Beta ( Rp)

where,

Rf = risk free rate

Rp = Market risk premium

Hence,

Beta systematic risk:

= 7% + 1.7 (6%)

= 7% + 10.2%

= 17.2%

Post Tax cost of debt:

=  Kd ( 1 - T)

where,

Kd = cost of debt

T = tax rate

= 20% * (1-0.4)

= 12%

WACC = [ (Ke × We) + (Wd × Kd(1-T)) ]

where,

We = weight of equity

Wd = weight of debt

             = [(17.2% × 0.6) + (0.4 × 20% × (1 - 0.4))]

             = 10.32% + 4.80%

             = 15.12%

Related Questions

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You are considering the purchase of a stock that is currently selling at $ 64 per share. You expect the stock to pay $ 4.50 in dividends next year. a.If dividends are expected to grow at a constant rate of 3 percent per year, what is your expected rate of return on this stock? b.If dividends are expected to grow at a constant rate of 5 percent per year, what is your expected rate of return on this stock?
Novak Imports is a merchandising Firm. Last year they reported sales of $677000 and cost of goods sold of $405100. The company's total variable selling and administrative expense was $60750, and fixed selling and administrative expense was $54350. The total contribution margin for the firm is:
Your company sponsors a 401(k) plan into which you deposit 10 percent of your $123,000 annual income. Your company matches 75 percent of the first 10 percent of your earnings. You expect the fund to yield 12 percent next year. Assume you are currently in the 31 percent tax bracket. a. What is your annual investment in the 401(k) plan? (Round your answer to the nearest whole number. (e.g., 32))b. What is your one-year return?
The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month period. Machine Hours Mfg. Overhead April 90,000 $ 170,000 May 80,000 $ 153,000 June 110,000 $ 198,000 July 95,000 $ 181,000 Using the high-low method, compute the fixed element of Olsen's

Wayne and celia had been married for 24 years before wayne died in an accident in 2014 . celia and her​ son, wally, age 21 in 2014 ​, continued to live at home in 2014 ​, 2015 ​, 2016 ​, and 2017 . wally worked​ part-time (earning​ $5,000 in each of the four​ years) and attended the university on a​ part-time basis. celia provided more than​ 50% of​ wally's support for all four years. what is​ celia's filing status for 2014 ​, 2015 ​, 2016 ​, and 2017 ​?

Answers

Answer:

I have put the filing status in table. So please refer attachment 1 for the table.

Explanation:

Please refer to attachment 1 for explanation.

Celia was married 24 years ago, i.e. 1980 and in 2014 her husband died, now her filing status is Widower since she didn’t marry till 2016 but she has son so he would be dependent member because Celia pays more than 50% of his expenses. Hence, the filing status for Celia would remain same till she pays for her son.
2014 married with 1 dependent, then for 2015 on...single with 1 dependent.

Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending. According to the model of aggregate demand and aggregate supply, what happens to prices and employment in the short run

Answers

Answer:

prices rise, employment rises.

Explanation:

In the starting equilibrium price, there would be more demand that result in fall in the firm inventory. Now in order to maintain the level of the inventory the firm would have to rise the production for this the firm should hire more wokers due to this the employment would rise also the wages are more paid as compared to before so it increase the production cost that results in rise in price

Therefore the above represent the answer

Divine Apparel has 2,600 shares of common stock outstanding. On October 1, the company declares a $0.25 per share dividend to stockholders of record on October 15. The dividend is paid on October 31. Record all transactions on the appropriate dates for cash dividends.

Answers

Answer:

Explanation:

The journal entries are shown below:

On October 1

Dividend Declared A/c Dr $650        (2,600 shares × $0.25)

         To Dividend payable A/c $650

(Being dividend is declared)

On October 15

No entry is required

On October 31

Dividend payable A/c Dr  $650

        To Cash A/c  $650

(Being dividend is paid for cash)

Final answer:

The company Divine Apparel declares a dividend of $0.25 on October 1, subsequently on October 31, the company pays out these dividends to all registered shareholders as of October 15. The total dividend payout would be $650.

Explanation:

The actions you described pertain to what is often referred to in the world of stocks and finance as dividend declaration and payment. On October 1, Divine Apparel declares a dividend of $0.25. This declaration doesn't result in a financial transaction just yet, but rather it promises a future cash outflow to shareholders.

To calculate this, we multiply the number of shares - 2,600 shares in this case - by the declared dividend of $0.25. This calculation would result in a total dividend of $650.

October 15 marks the 'record date', this is the date when the company looks at its records to see who the shareholders are. An investor must be listed as a holder of record to ensure the right of a dividend payout. It's important to note that there are no accounting entries to be made on this date, this is purely an administrative date.

Finally, October 31 is the 'payment date'. Every shareholder of record as of October 15 will receive the stipulated dividend. In this case, Divine Apparel pays out $650 in total dividends to the shareholders it had registered on October 15.

Learn more about Dividend Declaration and Payment here:

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Yummy Jams Company produces a line of jams. Yummy's estimated production of jars of jam for the fourth quarter of the year is as follows: October 75,000 November 98,000 December 63,000 Each jar requires half a pound of berries. Yummy prefers to buy the freshest berries, so its policy is to have just 3% of the following month's production needs in ending inventory. On October 1, the company had 1,125 pounds of berries in inventory. Yummy's pays $0.60 per pound of berries. It buys all berries on account and typically pays 40% of a month's purchases in that month, and the remaining 60% the following month. How much cash is paid in November for berry purchases (rounded to the nearest dollar)? a.$32,212 b.$19,963 c.$21,088 d.$28,900 e.$25,258

Answers

Answer:

The answer to this question is E. $25,258.

Your company has money to invest in an employee benefit plan and you have been chosen to be the plan's trustee. As an employee you want to maximize the interest earned on this investment and have found an account that pays 10% compounded continuously. Your company is providing you with $ 1,500 per month to put into your account for 10 years. What will be the balance in this account at the end of the 10-year period

Answers

Answer:

The  balance in this account at the end of the 10-year period is 310000

Explanation:

Solution

Given that:

Now, Recall that,

Time period is = 10 yrs = 12*10 = 120 months

Interest = 10%

= 10%/12 = 0.8333% per month continuously compounded .

Thus,

The rate effective  per month = e^r - 1 = e^0.0083333 - 1 = 0.00836815

so,

The month per  = 1500

The value of future  deposit = 1500 * (F/A,0.836815%,120)

= 1500 * [((1 + 0.00836815)^120 - 1)/ 0.00836815]

= 1500 * [((1.00836815)^120 - 1)/ 0.00836815]

= 1500 * 205.3359

= 308003.89

which is also = 310000 (nearest value)

Kirnon Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 3,650 client-visits, but its actual level of activity was 3,590 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: Fixed element per monthVariable element per client-visit Revenue - $39.90 Personnel expenses$35,900 $11.10 Medical supplies 1,900 7.90 Occupancy expenses 8,900 1.90 Administrative expenses 5,900 0.10 Total expenses$52,600 $21.00 The activity variance for administrative expenses in July would be closest to: Multiple Choice $66 F $6 U $66 U $6 F

Answers

Answer:

$666 Favorable

Explanation:

The computation of Activity variance is shown below:-

For computing the activity variance first we need to compute the Planning budget and flexible budget

Planning budget = $35,900 + $11.10 × 3,650

= $76,415

Flexible budget = $35,900 + $11.10 × 3,590

= $75,749

Activity variable = Activity variance - Flexible budget  

= $76,415 - $75,749

= $666 Favorable
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