Legacy Co. has no debt but can borrow at 7%. The firm’s WACC is currently 11%, and the tax rate is 35%.
a. What is Legacy Co.'s cost of equity?
b. If the firm converts to 25% debt, what will its cost of equity be?
c. If the firm converts to 50% debt, what will its cost of equity be?
d. What is Legacy Co.'s WAACC in part (b)? In part (c)?
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The MEC Store uses a perpetual inventory system. The following transactions occurred
during March 2022:
March 2 Purchased merchandise from Flake Co. for $5,600 under credit terms of 1/15, n/30,
FOB factory.
3 Paid $280 for shipping charges on the March 2nd purchase.
5 Sold merchandise to Shingle Co. for $3,700 under credit terms of 2/10, n/30, FOB shipping point. The cost of the merchandise was $1,780.
6 Received a $1,200 credit memorandum acknowledging the return of merchandise
purchased on March 2.
7 Shingle Co. requested a price reduction on the March 5 sale because the
merchandise did not meet specifications. Sent Shingle Co. a credit memorandum for
$400 to resolve the issue.
8 Received Shingle Co.'s payment of the amount due from the March 5 sale.
13 Paid the balance due to Flake Co.
18 Sold merchandise to a customer for $8,400 cash. The merchandise cost $4,680.
20 Paid $826 March telephone bill.
Instructions;
Record the above transactions in the General Joumal data entry form provided in the Learn Assessment Dropbox.
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