The effect of tax rate on WACC
K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of
35%
debt,
15%
preferred stock, and
50%
common stock. The cost of financing with retained earnings is
16%,
the cost of preferred stock financing is
12%,
and the before-tax cost of debt financing is
7%.
Calculate the weighted average cost of capital
(WACC)
given a tax rate of 30%.
The firm's WACC is
nothing%.
(Round to two decimal places.)
In: Accounting
Here are selected transactions of the Escobedo Shipping Service. Record a journal entry for each transaction.
TRANSACTIONS
1. Gave a cash refund of $875 to a customer because of a lost package. (The customer had previously paid in cash.)
2. Sent a check for $1,250 to the utility company to pay the monthly bill.
3. Provided services for $8,700 on credit.
4. Purchased new equipment for $6,400 and paid for it immediately by check.
5. Issued a check for $5.300 to pay a creditor on account.
6. Performed services for $16,775 in cash.
7. Collected $6,250 from credit customers.
8. The owner made an additional investment of $25,000 in cash.
9. Purchased supplies for $2,350 on credit.
10. Issued a check for $3,750 to pay the monthly rent.
In: Accounting
(Part #1) Complete the income statement below (shaded region) including the two ratios at the bottom of the table. (Part #2) Recommend one of the two financing options and DEFEND your decision with sound reasoning in the white space below.
(7 pts)
|
PART #1 |
Before New Line |
Financed 100% with Debt |
Financed 100% with Equity |
|
Sales |
200,000,000 |
260,000,000 |
260,000,000 |
|
COGS |
160,000,000 |
208,000,000 |
208,000,000 |
|
Gross Profit |
40,000,000 |
52,000,000 |
52,000,000 |
|
Operating Expenses |
30,000,000 |
39,000,000 |
39,000,000 |
|
Operating Profit |
10,000,000 |
13,000,000 |
13,000,000 |
|
Interest Expense |
4,800,000 |
||
|
EBT |
5,200,000 |
||
|
Income Tax Expense (25%) |
1,300,000 |
||
|
Net Income |
3,900,000 |
||
|
Times Int. Earned |
2.08 |
||
|
EPS (1,000,000 shares) |
3.90 |
||
Part #2: Which financing (debt or equity) do you choose and WHY?
In: Finance
In: Computer Science
Last year, 50% of MNM, Inc., employees were female. It is suspected that there has been a reduction in the percentage of females in the company. This year, in a random sample, 400 employees were male, 380 were female.
a. State the null and the alternative hypotheses.
b. At the .05 level using the critical value approach, determine if there has been a significant reduction in the proportion of females.
c. Show that the p-value approach results in the same conclusion as that of part b
In: Statistics and Probability
Before the last presidential debates, 50% of registered votes indicated they were planning to vote for the incumbent president. In a recent poll of 1200 registered voters after the debates, 636 indicated they are planning to vote for the incumbent president. Has there been a significant increase in the proportion of registered voters who are planning to vote for the incumbent president?
State the null and alternative hypotheses to be tested.
Compute the test statistic.
The null hypothesis is to be tested using α = 0.05. Determine the
critical value(s) for this test.
What do you conclude?
Compute the p-value.
In: Statistics and Probability
) Before the last presidential debates, 50% of registered votes indicated they were planning to vote for the incumbent president. In a recent poll of 1200 registered voters after the debates, 636 indicated they are planning to vote for the incumbent president. Has there been a significant increase in the proportion of registered voters who are planning to vote for the incumbent president? a. State the null and alternative hypotheses to be tested. b. Compute the test statistic. c. The null hypothesis is to be tested using α = 0.05. Determine the critical value(s) for this test. d. What do you conclude? e. Compute the p-value.
In: Statistics and Probability
Over the last 50 years the financial reporting systems have dramatically changed and will continue to change as the financial world faces changes such as globalization, changing regulations and the increased use of technology. The accounting profession must be ready to not only face these changes but to also adapt to them, providing relevant and reliable information to the many internal and external users of financial and managerial accounting reports.
It is important to understand the difference between managerial and financial accounting reports.
You are the chief executive officer of a multinational corporation that operates wholly owned subsidiaries in several countries. One of the company’s manufacturing plants is located in Europe. As CEO, respond to the following questions in 400-600 words:
What types of internal and external accounting reports will you use in the process of making decisions?
How will the reports differ for a multi-national corporation?
In: Accounting
The last 50 years have seen much cleaner air and ____________________ in the United States, due in part to federal legislation.
_______________________ are a vital part of the public health's assessment function, used to identify special risk groups, to detect new health threats, to plan public health programs and evaluate their successes, and to prepare government budgets.
The time when the leading cause of death in the United States switched from infectious to chronic disease was the ______________.
In: Nursing
Over the last 50 years the financial reporting systems have dramatically changed and will continue to change as the financial world faces changes such as globalization, changing regulations and the increased use of technology. The accounting profession must be ready to not only face these changes but to also adapt to them, providing relevant and reliable information to the many internal and external users of financial and managerial accounting reports.
It is important to understand the difference between managerial and financial accounting reports.
You are the chief executive officer of a multinational corporation that operates wholly owned subsidiaries in several countries. One of the company’s manufacturing plants is located in Europe. As CEO, respond to the following questions in 400-600 words:
What types of internal and external accounting reports will you use in the process of making decisions?
How will the reports differ for a multi-national corporation?
In: Accounting