precision cuts has a target debt-equity ratio of .48. its cost of equity is 16.4 percent, and its pretax cost of debt is 8.2 percent. if the tax rate is 21 percent, what is the company's wacc?

Answers

Answer 1

Precision Cuts' Weighted Average Cost of Capital (WACC) is 13.20%.

To calculate the Weighted Average Cost of Capital (WACC) for Precision Cuts, we need to consider the cost of equity, the pretax cost of debt, and the target debt-equity ratio, taking into account the tax rate.

Given information:

Cost of equity (Ke) = 16.4%

Pretax cost of debt (Kd) = 8.2%

Target debt-equity ratio = 0.48

Tax rate = 21%

First, let's calculate the after-tax cost of debt (Kd * (1 - Tax Rate)):

After-tax cost of debt = 8.2% * (1 - 21%)

After-tax cost of debt = 6.478%

Next, we can calculate the WACC using the formula:

WACC = (Equity / Total Capital) * Cost of Equity + (Debt / Total Capital) * After-tax Cost of Debt

Since Precision Cuts has a target debt-equity ratio, we can assume a total capital of 1 (equivalent to 100%). Therefore, the WACC formula simplifies to:

WACC = (Equity / (Equity + Debt)) * Cost of Equity + (Debt / (Equity + Debt)) * After-tax Cost of Debt

To find the weights of equity and debt, we use the target debt-equity ratio:

Equity weight = 1 / (1 + Target Debt-Equity Ratio)

Debt weight = Target Debt-Equity Ratio / (1 + Target Debt-Equity Ratio)

Substituting the values:

Equity weight = 1 / (1 + 0.48) = 0.6757

Debt weight = 0.48 / (1 + 0.48) = 0.3243

Now we can calculate the WACC:

WACC = 0.6757 * 16.4% + 0.3243 * 6.478%

WACC = 0.11099 + 0.021014

WACC = 0.132004 or 13.20%

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Related Questions


1. The
is the sum total of business activity in an area,

Answers

The economy is the sum total of business activity in an area.

What is the economy?

The economy of a country is its status in relation to the production and utilization of goods and services, as well as the supply of money.

This domain includes the:

Production, Distribution, and Trading of products and services by various agents.

The economy is described broadly as a social domain emphasizing the activities, discourses, and material manifestations linked with the creation, use, and administration of scarce resources.

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Among the key management skills, which do you think is the most important skill that a manager should possess?

Answers

Answer:

Good communication

Explanation:

Having good communication skills is probably the most important skill of all for managers to have. Unless you can properly communicate with those you supervise, the rest of the skills really won't matter.

Goals and objectives provide a form of control since they create a feedback opportunity regarding how well or how poorly the organization is executing its strategy. True of false?.

Answers

The statement 'goals and objectives provide a form of control since they create a feedback opportunity regarding how well or how poorly the organization is executing its strategy' is true.

Goals and objectives are the targets that a company or organization tries to achieve. Strategies are set in order to reach the goals and objectives of the workers of an organization.

These goals and objectives help in maintaining the wellness of work by the company. The goals and objectives set help a business determine whether the strategies applied are being executed properly or not and whether they are proving to be effective.

Based on the goals and objectives, feedback is generated based on the execution of strategies.

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3. ______ are defined as goods or services that are required for health and safety.

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Occupational Health and Safety are defined as goods or services that are required for health and safety. Information standards are guidelines governing the information that must be provided to consumers when they purchase specific goods.

What is the safety of goods?

A safe product is one that delivers either no risk or a minimum tolerable level of risk, taking into account the product's typical or reasonably foreseeable use and the need to maintain a high level of consumer protection.

Occupational health and safety is a multidisciplinary discipline that deals with all elements of workplace health and safety, with a heavy emphasis on preventing workplace dangers.

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Two mutually exclusive investment opportunities require an initial investment of $6 million. Investment A then generates $1.60 million per year in perpetuity, while investment B pays $1.40 million in the first year, with cash flows increasing by 5% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent? A. 44% B. 40% C. 10% D. 20%

Answers

The cost of capital at which both investment opportunities are considered equivalent is 20%. At this discount rate, the present value of the cash flows from both investments will be equal. (Option D)

To determine the cost of capital at which the investments are equivalent, we need to calculate the present value of the cash flows from each investment and equate them.

For Investment A:

Cash flow = $1.60 million per year

Discount rate = Cost of capital (unknown)

For Investment B:

Cash flow in the first year = $1.40 million

Cash flow in subsequent years = Increasing by 5% annually

Discount rate = Cost of capital (unknown)

Using the formula for present value of perpetuity:

Present Value = Cash Flow / Discount Rate

For Investment A, the present value is $1.60 million / Cost of capital.

For Investment B, the present value is $1.40 million / (Cost of capital - 5%).

To find the cost of capital at which both investments are equivalent, we set these two present values equal to each other and solve for the cost of capital:

$1.60 million / Cost of capital = $1.40 million / (Cost of capital - 5%)

By solving this equation, we find that the cost of capital is 20%. At this rate, the present values of the cash flows from both investments are equal, making them equivalent in terms of their profitability.

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The way a firm restructures its operations to reduce economic exposure to exchange rate fluctuations depends on interest rates and other economic conditions True False

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The way a firm restructures its operations to reduce economic exposure to exchange rate fluctuations depends on interest rates and other economic conditions" is True.What is exchange rate?An exchange rate refers to the rate at which one currency can be traded for another.

For instance, when exchanging U.S. dollars for euros, the exchange rate will indicate how many euros can be purchased with one U.S. dollar.Currency fluctuations are caused by variations in currency supply and demand. This supply and demand are influenced by a variety of economic and geopolitical factors, such as a country's monetary policy, inflation rates, and political stability

. A country's currency value can also be influenced by international trade relations.Exchange rate fluctuations may have a significant impact on firms that conduct business in foreign currencies. Because exchange rate fluctuations can significantly impact a firm's revenues, expenses, and profits, it is critical for firms to protect themselves against these dangers by establishing appropriate hedging strategies.variety of economic and geopolitical factors, such as a country's monetary policy, inflation rates, and political stability

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When setting prices of products, businesses want to make sure they can
cover their costs and make
A. a markup
B. an allowance
C. a discount
D. a profit

Answers

Answer:

When setting prices of products, businesses want to make sure they can cover their costs and make:

D. a profit

The setting prices of products, businesses want to make sure they can cover their costs and make a profit. Thus, option (d) is correct.

What is businesses?

The term “business” refers to earning a profit. The business is taking the risk and earning the profit. The business is mainly focused on the activities of the creation, distribution, and selling of concepts. The businesses are interested in the investment as a future perspective.

The business is the main motive for earning the profit. Businesses are increasing productivity as a result of rising profits. From the location to the facilities such as medical facilities, proper furniture, employee liberty of work, training, internet facilities, and furniture, etc., businesses are improving. The cost plus extra amount is called the profit.

As a result, in the setting prices of products, businesses want to make sure they can cover their costs and make a profit. Therefore, option (d) is correct.

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can anyone help me with the answer to Application problem 1-2.1 randomized?

can anyone help me with the answer to Application problem 1-2.1 randomized?

Answers

You can’t see anything in the picture

Which persuasive appeal do you think is the most effective in advertising? Explain.

Answers

The persuasive strategies used by advertisers who want you to buy their product can be divided into three categories: pathos, logos, and ethos.

Disadvantages of choosing a job that is extremely popular or in demand

Answers

The disadvantage of choosing a job that is very popular or a job that is in high demand is that after a while such a job may become saturated or it would become monotonous.

What is a high demand job?

This is the term that is used to refer to a job that the people that wpould employ labor are constantly in need of. Such a job is one that would require the people that have the qualification to opt in and get the places and the roles that they are to fill.

The issues that may arise from such a job that is in high demand is that after a period, such a job may have a lot of persons that would want to fulfil the role.

The number of qualified persons may become more than the job that is available for the people to do in the long run.

Hence this is a disadvantage. Therefore I would conclude by saying that the disadvantage of choosing a highly popular job is that the number of persons that are willing to fulfil the role may exceed the job overtime.

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7.1 Section Exel Question 1 of 264 points) Attempt 1 of 1 View question in a popup 4h 58m Remaining Overweight Men For a random sample of 60 overweight men, the mean of the number of pounds that they were overweight was 32. The standard deviation of the population is 4.1 pounds. Part: 0 / 4 Part 1 of 4 (a) The best point estimate of the mean is pounds

Answers

For a random sample of 60 overweight men,when the standard deviation is 4.1 pounds, the best point estimate of the mean is 32 pounds.

The given information is as follows:

the mean of the number of pounds that they were overweight was 32.

The standard deviation of the population is 4.1 pounds.

To calculate the best point estimate of the mean in pounds, we use the formula below:

\($$\hat{\mu}=\frac {\sum_{i=1}^{n}x_i}{n}$$\)

Where,\($$\hat{\mu}$$\)is the sample mean.

\($$\hat{\mu}=\frac {\sum_{i=1}^{n}x_i}{n}$$\) is the sample size.

\($$x_i$$\)is the individual observation.

First, we need to find the best point estimate of the mean, which can be found by using the formula as follows:

\($$\hat{\mu}=\frac{\sum_{i=1}^{n}x_i}{n}$$\)

Now, plug in the given values and evaluate it as follows:

\($$\hat{\mu}=\frac{\sum_{i=1}^{60}32}{60}$$$$\hat{\mu}=32$$\)

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15 pts-- multiple choice!

An investor who is characterized as being a risk-taker and buys and sells stocks on a daily basis looking for the big break is considered to be a ________________.

Investment bank professional

Long-term investor

Roll-the-dice speculator

Short-term dividend investor

Answers

I’m pretty sure the answer is the 3rd one
it must be option c

You choose to complete your homework rather than watch television so that you can earn a good grade. You made the choice with the lowest ______.

A. Opportunity cost

B. Demand

C. Scarcity

D. Benefit

Answers

Answer:

A. Opportunity cost

Explanation:

In Economics, Opportunity cost also known as the alternative forgone, can be defined as the value, profit or benefits given up by an individual or organization in order to choose or acquire something deemed significant at the time.

Simply stated, it is the cost of not enjoying the benefits, profits or value associated with the alternative forgone or best alternative choice available.

Hence, the opportunity cost of a choice is the benefits that could be derived in from another choice using the same amount of resources.

For instance, if you decide to invest resources such as money in a food business (restaurant), your opportunity cost would be the profits you could have earned if you had invest the same amount of resources in a salon business or any other business as the case may be.

In this scenario, you choose to complete your homework rather than watch television so that you can earn a good grade. Therefore, you made the choice with the lowest opportunity cost.

Answer:

Opportunity cost

Explanation:

True or False: After calculating how much money you have left after paying for all of your monthly expenses, you can
olan on spending up to 50% of that amount on car expenses

Answers

Based on microeconomic theory, it is true that after calculating how much money you have left after paying for all of your monthly expenses, you can

plan on spending up to 50% of that amount on car expenses.

Note that after making a payment on living expenses, such as rent, mortgage, utilities, loans, car payments, and food, the money that remains is discretionary income.

This discretionary income can be used as savings, investment, or spending on your discretionary expenses such as vacations and travel expenses, car expenses.

This is because discretionary expenses are categorized under wants instead of needs.

Thus, given that planning for car expenses is a want, then the statement in the question is True.

Hence, in this case, it is concluded that the correct answer is "True."

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what does it mean to provide customer service? PLEASE HELP

Answers

Answer:

Providing excellent customer service means going the extra mile in making sure a customer is happy and satisfied with a company's products or services. It also involves providing service to a customer in a timely, pleasant manner.

which task is carried out by book keeping

Answers

Answer:

Explanation:

Invoices and unpaid bills are one of the most important responsibilities of the bookkeeper. A bookkeeper who fails to keep an account of the money flowing into and out of the business, for instance, makes it all too easy to spend money that isn't there.

What are the basic points to be considered while running the occupation? for each of them​

Answers

Answer:

interest

qualification

skills

finance

I need points 5),:6)6

enter mia profit/loss for the 2 month

Answers

She profits more each month

Can you really answer the question of whether an opportunity is real before developing a product concept?

Answers

Answer:

Yes

Explanation:

For example, it has been said that what prompted e-commerce on platforms such as Amazon, eBay, etc was a result of the opportunity their founders saw with the invention/adoption of the internet.

In other words, they saw a real opportunity (through the internet growth rate) and thus decided to develop a product concept. Hence, we could thus conclude with a yes to the question.

Elasticity of savings can best be found by _________________________________________. Select all that apply: dividing the percentage change in interest rate by the percentage change in financial savings the shape of the demand curve for financial capital determining the percentage change in the quantity of savings divided by the percentage change in interest rates None of these

Answers

The elasticity of savings can best be found by determining the percentage change in the quantity of savings divided by the percentage change in interest rates. This method helps to measure the responsiveness of savings to changes in interest rates. In other words, it indicates how sensitive the amount of savings is to changes in the interest rate.

To calculate the elasticity of savings, follow these steps:

1. Find the initial quantity of savings and the initial interest rate.


2. Calculate the new quantity of savings and the new interest rate after a change occurs.


3. Determine the percentage change in the quantity of savings by subtracting the initial quantity of savings from the new quantity of savings, dividing the result by the initial quantity of savings, and then multiplying by 100.


4. Determine the percentage change in the interest rate by subtracting the initial interest rate from the new interest rate, dividing the result by the initial interest rate, and then multiplying by 100.


5. Finally, divide the percentage change in the quantity of savings by the percentage change in interest rates to find the elasticity of savings.

This method is preferred because it accurately measures the responsiveness of savings to changes in interest rates, allowing for a better understanding of how people adjust their savings behavior in response to changes in the financial market.

The shape of the demand curve for financial capital is not relevant in this context, as it pertains to the relationship between the price of capital and the quantity demanded. Therefore, the correct answer is determining the percentage change in the quantity of savings divided by the percentage change in interest rates.

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In what kind of nation are members of a society most likely to have good educational opportunities?

a developing nation

a developed nation

a country emerging from an economic and political crisis

an underdeveloped nation

Answers

Answer:

a developed nation for states

what is motivation in business

Answers

Answer:

La motivación emprendedora es un factor importante para contribuir con el desarrollo de una sociedad. También es importante el proveer instrumentos para canalizar las acciones de los emprendedores/as potenciales para obtener el exito.

[ Entrepreneurial motivation is an important factor in contributing to the development of a society. It is also important to provide instruments to channel the actions of potential entrepreneurs to achieve success..]

Explanation:

Sorry my English is not very good but I hope you understand and help you with something.

What is a stock symbol?

Answers

Answer:

A stock symbol is an arrangement of characters—usually letters—representing publicly-traded securities on an exchange. When a company issues securities to the public marketplace, it selects an available symbol for its shares, often related to the company name.

Explanation:

The primary type of loan made by a savings and loan association is the long-term installment loan used for the purchase of a home.

Answers

The primary type of loan made by a savings and loan association is the long-term installment loan used for the purchase of a home.

Savings and loan associations (S&Ls) generally offer long-term installment loans, particularly for buying a house. Mortgages are the primary type of loan made by savings and loan associations. S&Ls provide consumers with funds to buy a house by issuing mortgage loans, which are typically paid back over a period of 15 to 30 years in monthly installments.

The vast majority of S&Ls are also state-chartered. They are required to comply with both state and federal regulations, which include reserve requirements and lending limits. A savings and loan association is a kind of financial institution that primarily provides home mortgages and other forms of home financing.

They get their funding by taking deposits from their customers, who are in turn paid interest on their deposits. S&Ls are heavily regulated by state and federal authorities in the United States. These associations are usually a great source of long-term financing for homebuyers.

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The economic crisis in 2008 had a huge impact on eaton’s business to business customers. In response to the crisis, eatons customers tried to cut cost and lower their production. This in turn affected eatons sales negatively, which is an example for _______.

Answers

The economic crisis in 2008 had a huge impact on eaton’s business to business customers. In response to the crisis, Eaton's customers tried to cut costs and lower their production. This in turn affected eatons sales negatively, which is an example for solutions selling.

From peak to trough, US gross domestic product fell by 4.3 percent, making this the deepest economic crisis recession since warfare II. It absolutely was also the longest, lasting eighteen months.

The per centum quite doubled, from 5 percent to 10 percent. The collapse of the housing market — fueled by low interest rates, easy credit, insufficient regulation, and toxic economic crisis subprime mortgages — led to the slump. The good Recession's legacy includes new financial regulations and an activist Fed.

Of 198 Countries, compared to the proportion change in GDP between 2007 and 2009, the foremost impacted countries are predominantly Eastern European and trade-dependent economic crisis advanced economies. One of the foremost visible aspects of the recession, job losses and unemployment are known to be related to increased stress, poorer health outcomes.

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The desire to have a relatively even pattern of consumption over time is known as:________

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The desire to have a relatively even pattern of consumption over time is known as "smoothing."

Smoothing refers to the practice of distributing consumption or expenditure evenly across different time periods.
For example, let's say you receive a monthly allowance of $100. If you spend all $100 in the first week and have nothing left for the rest of the month, that would be an uneven pattern of consumption. However, if you spend $25 each week, you would be smoothing your consumption, ensuring a more even distribution of your allowance throughout the month.
Smoothing can also be applied to other areas, such as business operations. A company may choose to smooth its production process to maintain a consistent output over time. This could involve adjusting production levels to meet demand without experiencing sudden peaks or troughs.
In summary, the desire for a relatively even pattern of consumption over time is called "smoothing." It helps ensure a more balanced and consistent approach to consumption or production.

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who is elon musk......​

Answers

Answer:

Elon Musk FRS an entrepreneur and business magnate. He is the founder, CEO, and Chief Engineer at SpaceX; early stage investor, CEO, and Product Architect of Tesla, Inc.; founder of The Boring Company; and co-founder of Neuralink and OpenAI. A centibillionaire, Musk is one of the richest people in the world.

because the cost of labor is low, many countries have ____ manufacturing and call center functions to india.
a. outsourced
b. exported
c. imported
d. traded
e. franchised

Answers

Answer:

a

Explanation:

India called for the center functions as many other countries have outsourced manufacturing, because the cost of labor is low.

What is outsourced manufacturing?

Outsource manufacturing is the process of employing the peoples/labor which are outsides of the company to create parts of the product, or to build an entire product.

When a business organization outsources a portion of their production line to a third-party business company in a different location, they frequently see a large modification in production costs.

Outsourcing production permits companies to think on what they do foremost, rather than headache about tasks that are mundane and non-essential.

Examples:

Content writing, engineering, identification services, and legal documentation are the same examples of the outsource manufacturing.

Why India functions as outsourced manufacturing?

There are many causes to manufacturing companies prefer to outsource to India. Like they decreased labor costs, provides quick delivery, availability of services and indirect cost savings, etc.

A significant amount of money is secure in terms of spending in real estate, equipment purchase, and maintenance.

Therefore, option [A] is correct.

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An asset which costs $18,800 and has accumulated depreciation of $6,000 is sold for $11,600. What amount of gain or loss will be recognized when the asset is sold

Answers

A loss of $1,200 will be recognized when the asset is sold.

An asset that costs $18,800 and has accumulated depreciation of $6,000 is sold for $11,600. What amount of gain or loss will be recognized when the asset is sold?

Cost of asset = $18,800

Depreciation= $6,000

Asset value after depreciation= $18,800 - $6,000

                                                    = $12,800

Sold for the price = $11,600

Loss= $12,800- $11,600 =$1200

What is depreciation in accounting?

The accounting technique of spreading out the cost of a tangible item over its useful life is known as depreciation. The amount of depreciation shows how much of an asset's worth has been utilized. Purchasing assets over a predetermined length of time enable businesses to generate income from the assets they own.

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think of one business establishment nearby. indentify the micro and macro environment factors that affect the business estabishment

Answers

the factors in the micro and macro environments that have an impact on the establishment of businesses are Variables in the microenvironment Factors in the macro environment, suppliers governmental.

What is meant by Business establishment?

Any organization, regardless of structure, that provides the general public with goods, services, or lodgings is referred to as a business establishment.

An otherwise qualified establishment with membership requirements is deemed to provide services to the general public if its membership requirements are limited to the payment of fees or only include criteria that a sizable fraction of the city residents could satisfy.

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