WACC

The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1,167. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Paulson's WACC using market-value weights.

Assets

Cash $120

Accounts Receivable 240

Inventories 360

Plant and equipment, net 2,160

Total assets $2,880

Liabilities and Equity

Accounts Payable and accruals $10

Short-term debt 47

Long-term debt 1,120

Common Equity 1,703

Total liabilities and equity $2,880

Answers

Answer 1

The WACC of Paulson Company using market-value weights is 9.35%. The Weighted Average Cost of Capital (WACC) is a calculation of a company's expense of capital in which each category of capital is weighed proportionately.

The cost of all forms of financing, including common stock, preferred stock, bonds, and other long-term debt, are combined in the WACC equation to determine a firm's overall expense of capital.

The formula for WACC is as follows:

WACC = ((E/V) * Re) + [((D/V) * Rd) * (1 - Tc))]

Where:

Re = Cost of equity

Rd = Cost of debt

E = Market value of the company's equity

D = Market value of the company's debt

V = E + D- E = Market value of the company's equity

D = Market value of the company's debt

Tc = Corporate tax rate

Let's calculate the WACC of Paulson Company using market-value weights:

Step 1: Calculate the market value of the company's equity

E = Shares outstanding * Market price per share

= 576 * $4

= $2,304

Step 2: Calculate the market value of the company's total debt

D = Short-term debt + Long-term debt

= $47 + $1,120

= $1,167

Step 3: Calculate the proportion of the equity market value to the total capital structure (equity + debt)

Market value of equity proportion (E/V) = E / (E + D)

= $2,304 / ($2,304 + $1,167)

= 0.6644 or 66.44%

Step 4: Calculate the proportion of the debt market value to the total capital structure (equity + debt)Market value of debt proportion

(D/V) = D / (E + D)

= $1,167 / ($2,304 + $1,167)

= 0.3356 or 33.56%

Step 5: Calculate the before-tax cost of debt Rd

= 10%

Step 6: Calculate the cost of equity Re

= 14%

Step 7: Calculate the tax rateTc = 40%

Step 8: Insert the data into the WACC equation

WACC = ((E/V) * Re) + [((D/V) * Rd) * (1 - Tc))]WACC

= [(0.6644 * 0.14) + (0.3356 * 0.1 * (1 - 0.4))]WACC

= 0.0935 or 9.35%

Therefore, the WACC of Paulson Company using market-value weights is 9.35%.

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Related Questions

If the exchange rate between the u.s. dollar and the Canadian dollar is 1:1.3, which of the following is true

Answers

Answer:

It will cost less to buy a $5 item in Canada than it will in the United States

Explanation:

if the exchange rate between the US Dollar and the canadian dollar is 1:1.3, then that menas that it would be easier to buy a commodity of $5 in canada as against buying in the US. This is because the price of the commodities will be affected by the exchange rate thus price making room for a 0.13

Cheers

If an increase in the price of good e leads to a large decrease in the demand for good f, what is the relationship between the two goods?.

Answers

The relationship between the two goods is: The goods are complementary.

What are complementary goods?

Complementary goods can be defined as those goods which consumer buy together and as well  use together.

The goods are tend to be complementary based on the fact that the cross-price elasticity of demand of those goods are tend to be negative and large.

Therefore the relationship between the two goods is: The goods are complementary.

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Pedro is a very talented young man who lives in a small, remote town in the mountains. He gets good grades, plays in the band, and is active in the drama club. He is close to his large family and wants a career that will allow him to maintain his current life style. What career option should Pedro consider? A. Teacher B. Musician C. Actor D. TV personality

Answers

Answer:

A. Teacher

Explanation:

If Pedro chooses to become an actor, a musician, or a TV personality, and was successful, he wouldn't be able to maintain his current life style. In order to try to be successful, he would have to move to a large city by his own. Musicians, actors and TV personalities earn money depending on their popularity, and remote towns in the mountains are not very densely populated.

In the past few years, the internet has helped some people to become influencers or has helped musicians to become famous and earn money, but most of them eventually had to do things in the real world, not only the internet in order to remain popular.

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

Answers

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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Which of the following factors could explain why Lowell Inc. had a negative net cash flow last year, even though the cash on its balance sheet increased?
The company repurchased 20% of its common stock.
The company sold a new issue of bonds.
The company made a large investment in new plant and equipment.
The company paid a large dividend.
The company had high amortization expenses.

Answers

Among the given options, the factor that could explain why Lowell Inc. had a negative net cash flow last year, even though the cash on its balance sheet increased is that the company made a large investment in new plant and equipment. The correct answer is option(c).

Net cash flow is the amount of cash inflows minus cash outflows for a specific period. It's possible for a company to have negative cash flow in a given period even if cash on its balance sheet has increased. The reason for a negative cash flow might be that the company is investing heavily in the business by acquiring fixed assets or paying off long-term debts.

Sometimes companies may need to spend more money on expenses than they earn. The major reason behind negative cash flow is a cash outflow from investing or financing activities. Therefore, the factor that could explain why Lowell Inc. had a negative net cash flow last year, even though the cash on its balance sheet increased is that the company made a large investment in new plant and equipment.

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Which words means finds its food; a consumer.?

Answers

Answer:

The word that means finding its food is hunting

If a parent MNC backs the debt of a foreign subsidiary, the borrowing capacity of the parent might be reduced because creditors may not be willing to provide as many funds to the parent if those funds may possibly be needed to rescue the subsidiary.
a. true b. false

Answers

If a parent MNC backs the debt of a foreign subsidiary, the borrowing capacity of the parent might be reduced because creditors may not be willing to provide as many funds to the parent if those funds may possibly be needed to rescue the subsidiary which is true.

If a parent multinational corporation (MNC) guarantees the debt of its foreign subsidiary, it creates a contingent liability for the parent. This means that if the subsidiary is unable to repay the debt, the parent MNC becomes responsible for fulfilling the obligations. As a result, creditors may view this contingent liability as a potential risk to the parent's borrowing capacity.

Creditors may be hesitant to provide additional funds to the parent MNC if they believe that those funds might be required to rescue the subsidiary in the event of financial distress. This reduced borrowing capacity can limit the parent's ability to raise capital for its own operations or investments.

Therefore, the statement is true. The parent MNC's backing of the foreign subsidiary's debt can potentially reduce the parent's borrowing capacity due to the increased risk perceived by creditors.

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Which of the following is NOT a part of reviewing and revising the financial plan?
-developing an action plan which identifies ways to achieve the goals
-regularly assessing the financial decisions
-taking a complete review of finances at least once a year
-making priority adjustments which will being financial goals in like with current life situation

Answers

Answer:

Developing an action plan which identifies ways to achieve the goals.

Explanation:

Reviewing & Revising the Plan

Involves:

regularly assessing the financial decisions

taking a complete review of finances at least once a year

making priority adjustments which will bring financial goals in line with current life situation

ASAP I need help.
Create a list of five action verbs you might use on a job application to describe skills and/or work history. Here are some examples: (organized, produced, selected, coordinated, contributed). Find five other than the examples.

Answers

Progressed, succeeded, achieved, determined, advanced

Which of the following statments about government regulation of business is true?

A. Small businesses often feel the burden of regulations more than large corporations

B. It is easy for large corporations to comply with most government regulations

C. It is easy for small businesses to comply with most government regulations

D. Large corporations often feel the burden of regulations more than small businesses ​

Answers

Answer:

small business often feel the burden of regulations more than large corporations

Explanation:

Since they have less money to spend on things like building permits and licensing fees, small business owners may find it more difficult as a result of federal rules, which can also lead to lost productivity and fewer starting businesses.

Thus, Option A is correct.

What are a few unfavorable consequences of government regulations?

Ineffective laws may waste scarce resources, hinder innovation, growth, and job creation, undermine sustainable development, unintentionally injure the individuals they are meant to protect, and degrade public trust in our government.

Inefficiency and additional costs are encountered. Government regulation has a number of benefits, but there are also some drawbacks. Businesses typically incur more costs as a result of government regulation, which results in some operational inefficiencies.

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can someone please help me with this question?​

can someone please help me with this question?

Answers

Answer:

We can first assess the effects of each of the transactions on the balance cheat.

the a) transaction will reduce cash by $500, and reduce creditors by the same amount.

the b) transaction will increase cash by $300, and reduce debtors by the same amount.

the c) transaction will reduce cash by $1,000, and reduce the Loan from L. Stennett by the same amount.

Now we can list this effects.

Cash is reduced by $500 + $1,500 and increased by $300. The total net effect on cash is then a $1,200 decrease ($1,500 decrease + $300 increase).

All the other accounts have only one reduction, so we simply substract that figure from the balance sheet on the picture to obtain our new figures.

Now we can write the new balance sheet

Balance Sheet as at 10 April 2007

Assets

Buildings                $6,000

Motor Vehicle        $4,000

Stock of Goods      $2,000

Debtors                  $2,500 (-$300)

Cash at bank         $2,000 (-$1,200)

Total Assets           $16,500

Liabilities

Loan L. Stennet      $1,000 (-$1,000)

Creditors                 $1,100 (-$500)

Total Liabilities        $2,100

Capital                     $14,400

By the accounting equation, Capital + Liabilities = Assets, we see that it holds true: $14,400 + $2,100 = $16,500, so are figures are right.

true or false. firms are typically more successful when they focus on opportunities that build on their strengths relative to those of their competition.

Answers

The statement is False. firms are typically more successful when they focus on opportunities that build on their strengths relative to those of their competition.

A company is a business organization including an employer that produces and sells goods and services with the aim of producing sales and making an income. Examples of firms are sole proprietorships, partnerships, restrained legal responsibility agencies, or corporations. The time period is slightly extra usually associated with a partnership.

A company is an enterprise organization that seeks to make an income thru the sale of products and offerings. The time period company is synonymous with commercial enterprise or company. corporations can function under numerous exclusive systems, consisting of sole proprietorships and groups. A company is a business enterprise that sells or produces something or which affords a provider that human beings pay for. The principal characteristic of the companies is to offer goods. The firm is a vital institution in the functioning of any economic gadget in which people meet their needs through the department of hard work, cooperative production, and the trade of products and offerings.

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If the United States transfers tasks and jobs to other countries where labor and supplies are less expensive, it is called outsourcing. When foreign companies transfer tasks and jobs to companies in the United States, it is a practice called

Answers

insourcing

Reason: Although outsourcing has become politically contentious in recent years amid concerns about jobs being taken by foreign workers, foreign companies transfer tasks and jobs to American companies (a practice known as insourcing) far more frequently than American companies outsource tasks and jobs to foreign countries (a practice known as outsourcing).

How can public health decrease the economic impact on health care?

Answers

Answer:

First, healthier people are more economically productive. Better health also leads to an increase in savings rates—because healthier people expect to live longer and are naturally more concerned with their future financial needs. Another bridge between health and the economy is education.

Explanation:

Type the correct answer in the box. Spell all words correctly.
Which customers help in the profitability and growth of an organization?
Both external and [ }customers help in the profitability and growth of an organization in a direct or indirect manner.

Answers

Answer:

Both external and Internal customers help in the profitability and growth of an organization in a direct or indirect manner.

Explanation:

External customers refer to the people who pay for goods and services. Their relationship with a business is through the purchasing of goods or services. A business produces goods and services targeting to sell them to external customers. They are also known as clients.

Internal customers are people that have a relationship with the business. They could be employees, trade partners, investors, and shareholders. Internal customers facilitate the smooth running of a business. They make it possible for a business to avail its products and services to external customers. Internal customers may buy or not buy from the business.

Answer:

internal

Explanation:

Just took test 5/5

The table below shows the measurements M1 and M2 taken by the same analyst. Draw a scatter plot of the data.
M1 0.243 0.352 0.357 0.469 0.444 0.555 0.552
M2 0.245 0.348 0.361 0.470 0.439 0.560 0.548
a.
C.
0.75
0.75
0.625
0.625
.
0.5
0.3
.
0.375
0.375
2
0.23
0.25
0.125
0.125
0.125
0.25
0.375
0.5
0.62
0.125
0.25
0.375
0.5
0.62

Answers

Answer:

Its C

Explanation:

Answer:

C

Explanation:

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Explain the role of public relations in developing and maintaining a corporate image.

Answers

By overseeing communication and relationships between an organisation and its stakeholders, public relations plays a critical part in creating and sustaining a company image.

To influence the perception, reputation, and overall image of the business, strategic communication is used. To improve the public's view of the company, public relations experts take part in activities like media relations, crisis management, community involvement, and employee communications. Public relations contributes to the development of trust, credibility, and goodwill among stakeholders by clearly articulating the company's ideals, accomplishments, and social responsibility efforts. It helps build the company's brand, draw in clients, investors, and talent while minimising reputational hazards.

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the coordination of bureaucrats business leaders and politicians to set policy in their mutual interest is called

Answers

Answer:

Rent-seeking, although less formal names include cronyism and special interests

Explanation:

yuhhhhhhh yu alr know the vibesss
im now a expert yhhhhhhhhhhhhhhhhhhhhh

Answers

Answer:

............................................ NICE

Answer:

Eyyy how I wish I can Be the expert tho :<

The first insurance company in the United States was

Answers

Answer is Friendly Society

Friendly Society was the first insurance company in the United States, it was established in Charleston, South Carolina.

The first insurance company in the United States was the Philadelphia Contribution ship for the Insurance of Houses from Loss by Fire, founded in 1752 by Benjamin Franklin and his associates.

The company was established in response to the frequent and devastating fires that occurred in colonial Philadelphia. Details are as follows:

Founding: The Philadelphia Contribution ship was founded on February 13, 1752, with a mission to provide financial protection to homeowners in the event of fire-related losses.

Structure: The company operated as a mutual insurance company, meaning it was owned by its policyholders rather than external shareholders. Policyholders shared the risk collectively and contributed to a common fund to cover losses.

Fire Insurance: The primary focus of the Contributions hip was fire insurance. It offered policies to homeowners to protect their houses, buildings, and other property from fire-related risks.

Premiums and Policies: Policyholders paid premiums to the company based on the value of their insured property. In return, they received a policy that detailed the terms and conditions of their coverage.

Growth and Legacy: The Philadelphia Contribution ship played a significant role in shaping the insurance industry in the United States. It set a precedent for the establishment of other insurance companies across the country.

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Blossom Corporation acquired a patent on May 1, 2020. Blossom paid cash of $77000 to the seller. Legal fees of $1000 were paid related to the acquisition. What amount should be debited to the patent account

Answers

The total cost of acquiring the patent would be $78000 ($77000 cash paid to the seller + $1000 legal fees). Therefore, the amount that should be debited to the patent account would be $78000.

When a company acquires a patent, it needs to record the cost of acquiring the patent on its balance sheet. The cost of acquiring a patent includes the cash paid to the seller and any legal fees incurred in the process.In this case, Blossom Corporation paid $77,000 in cash to the seller and $1,000 in legal fees. Therefore, the total cost of acquiring the patent is $78,000 ($77,000 + $1,000).To record the acquisition of the patent in the accounting records, the company should debit the patent account for $78,000 and credit the cash account for $77,000 and the legal fees account for $1,000.

It's important to record the patent at its cost, as this represents the value of the asset to the company. The patent will be amortized over its useful life, and the amortization expense will be recorded in the company's income statement over time.

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To understand how democracy developed in ancient Greece, you must examine the polis, which was the Greek word for a
The Greeks shared a language and culture, but each polis had a different government. In 509 BCE, Athens created a new set of rules that gave power to the people. The Greeks called this government a
Members of the Council of 500 were chosen

Answers

Answer:

To understand how democracy developed in ancient Greece, you must examine the polis, which was the Greek word for a city-state. The Greeks shared a language and culture, but each polis had a different government. In 509 BCE, Athens created a new set of rules that gave power to the people. The Greeks called this government democracy. Members of the Council of 500 were chosen randomly.

Answer:

city-state ,democracy ,randomly

Explanation:

just took the test on edge




In
, people invest money in a company in exchange for the company’s
.


Answers

Answer:

In equity crowdfunding, people invest money in a company in exchange for the company’s shares

Explanation:

Equity crowdfunding is the process in which people invest in start up companies and early stage companies that have not been listed on a stock market in exchange for shares in that company. As a result of the investment, the person becomes a shareholder and makes profit when the company do well but if the company fails, shareholders make losses.

Startups and early-stage companies use this method to raise capital.

10th standard Sura guide for Tamil​

Answers

Answer:

I WANT TO HELP YOU...

BUT I DID NOT NO

SORRY......

Air max 270's or Jordan 1 Mid's?

Answers

Air max 270's

they make me taller than Jordan 1 Mid's, and since im a short dude, I lowkey need that extra inch.

where does McKenna grace live? Brainliest for the correct answer​

Answers

Answer:

McKenna grace lives in Texas of America.

In terms of attracting and retaining employees from various backgrounds, a. organizations that discriminate may have higher compensation costs because of drawing from a larger pool of workers b. if an organization develops a reputation for valuing only a subset of workers, those preferred workers will tell their friends who are similar, thus increasing the overall numbers of potential applicants and workers.
c. recruitment advertisements featuring heterogeneous workers have no effect on minorities' desire to work for organizations.
d. if an organization develops a reputation for valuing alltypes of workers, this will increase the organization's ability to compete in tight labor markets.
e. All of the above are true.

Answers

If an organization develops a reputation for valuing all types of workers, this will increase the organization's ability to compete in tight labor markets. Here option D is the correct answer.

Organizations that value all types of workers and promote diversity and inclusion can attract and retain employees from various backgrounds. A diverse workforce can bring new perspectives, ideas, and solutions to the organization, leading to greater innovation and creativity.

It can also help the organization better understand and serve its diverse customer base. In addition, having a reputation for valuing diversity and inclusion can improve the organization's image and attract a broader pool of applicants, especially in tight labor markets where competition for top talent is high.

In contrast, organizations that discriminate against certain groups of people may limit their applicant pool and may face higher compensation costs to attract and retain employees. Discrimination can also lead to negative publicity and damage the organization's reputation, leading to difficulty in attracting qualified applicants and even losing existing employees.

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List one type of appropriate workplace verbal communication

Answers

Answer:

Explanation:

Call centers are the appropriate workplace verbal communication

The main source of finance for public corporations is s _ _ _ _ f _ _ _ _ _ _ (from t _ _) ​

Answers

Answer:

tax

Explanation:

the tax is a national practise carried all over the country

What can be said about the culture of services?
I. Processes are invisible
II. Processes are well defined
III. More scientific
IV. Not well defined or documented

A. I, II, and III only
B. I, II, and IV only
C. II, III, and IV only
D. All of the above

Answers

Answer is b hope this helps

In the service culture, processes are invisible and procedures are not well defined or documented. This culture is focused on customer service, to provide the best experience.

Therefore, processes are invisible, that is, the customer is not able to identify internal processes if they are not useful, but they must perceive the service as a mystery where all their needs are promptly met.

In the service culture, this is also not well defined or documented, so as not to create standardization of the service, but a personalized service that meets the needs of each customer individually.

Therefore, in the service culture, the focus is on offering the best experience for the customer, through the creation of value, excellent service and employees capable of satisfying their needs.

The service culture is capable of generating greater competitiveness, customer loyalty and positioning for a company.

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