The following data pertains to Xena Corp.: Xena Corp. Total Assets $23,610 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity: Book Value $ 6,150 Market Value $25,830 Marginal Income Tax Rate 37% Market Beta 1.73 Determine the weight on equity capital that should be used to calculate Xena's weighted-average cost of capital. Select one: A. 73.8%
B. 70.0%
C. 24.0%
D. 38.7%
Answers
Answer:
Option (B) is correct.
Explanation:
Given that,
Total Assets = $23,610
Interest-Bearing Debt (market value) = $11,070
Average borrowing rate for debt = 10.2%
Common Equity:
Book Value = $6,150
Market Value = $25,830
Marginal Income Tax Rate = 37%
Market Beta = 1.73
Hence,
Weight on equity capital = Equity ÷ (Debt + Equity)
= 25,830 ÷ (11,070 + 25,830)
= 25,830 ÷ 36,900
= 70%
Therefore, the weight on equity capital is 70%.
Related Questions
On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $90,000 in cash and giving a short-term note for $50,000. Legal fees paid were $1,750, delinquent taxes assumed were $25,000, and fees paid to remove an old building from the land were $9,000. Materials salvaged from the demolition of the building were sold for $1,000. A contractor was paid $415,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.
Novak Corp. has the following transactions during August of the current year. Aug. 1 Issues shares of common stock to investors in exchange for $10,950. 4 Pays insurance in advance for 3 months, $1,020. 16 Receives $780 from clients for services rendered. 27 Pays the secretary $520 salary. Journalize the transactions.
A common carrier bailee generally would avoid liability for loss of goods entrusted to its care if the goods area. Stolen by an unknown person.b. Negligently destroyed by an employee.c. Destroyed by the derailment of the train carrying them due to railroad employee negligence.d. Improperly packed by the party shipping them
Comparing Costs of Credit Using Three Calculation Methods. You have been pricing a compact disk player in several stores. Three stores have the identical price of $300. Each store charges 18 percent APR, has a 30-day grace period, and sends out bills on the first of the month. On further investigation, you find that store A calculates the finance charge by using the average daily balance method, store B uses the adjusted balance method, and store C uses the previous balance method. Assume you purchased the disk player on May 5 and made a $100 payment on June 15. What will the finance charge be if you made your purchase from store A? From store B? From store C? (Obj. 2)
Answers
Answer:
Accumulated depreciation on car at the end of year 2 will be 22,500
Explanation:
The unit-of use Method recognize depreciation base on the use of a cost driver. This cost driver could be miles, number of units produced, or others.
(60,000-10.000)/100,000 = .5 rate per mile
acumulated depreciation at year 2
25,000 + 20,000= 45,000 total miles driven
45,000 * 0.5 = 22,500
Answers
Answer:
The correct answer is letter "B": top management's attitude toward decentralized operating structures.
Explanation:
A sales forecast is an estimate of the sales a company projects to process during a given period. This is done so that the firm can have an idea of the resources necessary to produce a determined amount of output from where the company can profit a margin that allows keep the business up and running satisfying stakeholders and employees' expectations.
While creating a sales forecast it is important to consider events that could affect the regular operations of the business such as government regulatory policy changes, competition, and the economy of the industry. Top executives' attitudes towards operating structures are irrelevant for such a purpose.
Answer:
top management's attitude toward decentralized operating structures.
Explanation:
Answers
Answer:
The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $102480
Explanation:
For computing the cash disbursements for manufacturing overhead, the calculation is shown below:
= Direct labor cost + Fixed manufacturing overhead
where,
direct labor cost = Direct labor hours × per labor rate
= 6,100 × $3.00
= $18,300
And, in budgeted fixed manufacturing overhead, the depreciation should be deducted as it is a non cash expense.
So,
= Budgeted fixed manufacturing overhead - depreciation
= $103,090 - $18,910
= $84,180
Now apply the above values to the formula.
So, cash disbursements is = $18,300 + $84,180 = $102480
Hence, The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $102480
Final answer:
The January cash disbursements for manufacturing overhead in Morrish Inc.'s budget are calculated by adding the total variable costs ($18,300) to the fixed costs excluding depreciation ($84,180), amounting to $102,480.
Explanation:
To calculate the January cash disbursements for manufacturing overhead on the Morrish Inc.'s manufacturing overhead budget, we need to separate the overall costs into its components, namely fixed and variable costs.
In this case, the variable overhead rate is $3.00 per direct labor-hour, and the company expects to require 6,100 direct labor-hours in January. This gives a total variable cost of 6100 * $3 = $18,300.
The fixed manufacturing overhead is stated as $103,090, however, this includes a depreciation cost of $18,910. As depreciation is a non-cash expenditure, it should be excluded from the cash disbursements calculation. Therefore, the fixed costs for this calculation will be $103,090 - $18,910 = $84,180.
Add together the variable and fixed costs to get the total January cash disbursements for manufacturing overhead: $18,300 (variable) + $84,180 (fixed) = $102,480.
Learn more about Overhead Costs here:
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Answers
Answer:
$273,164
Explanation:
Data given in the question
Recognized amount of service revenue = $340,000
And, the account receivable balance is $66,836
So, by considering the above information, the amount of cash collected is
= Recognized amount of service revenue - the account receivable balance
= $340,000 - $66,836
= $273,164
By deducting the account receivable balance from the service revenue recognized amount we can get the cash collected amount
Answers
Answer:
$23, 472
Explanation:
The question is to calculate how much Derek is willing to pay for the machine.
What the money Machine will pay in 5 years = $43, 245.00
The Discount rate= 13%
The number of years = 5 Years
Therefore, Present value of the machines:
PV= P x [1/(1+r)∧n]; P= Future benefit; r = rate and n = number of years
The calculation is as follows
PV= P x [1/(1+r)∧n
= $43,245 x 1/[(1+0.13)∧5]
=$43,245 x 1/1.84243
=$43,245 x 0.5428
=$23,472 (rounded)
Answers
Answer:
Strategic leaders can help any airline related issue to be solved
Explanation:
Strategic leaders are needed everywhere. An airline company would indeed benefit from a strategic leader and or manager