Sangita has the opportunity to purchase a new piece of equipment for her factory. She wants to calculate the Weighted Average Cost of Capital (WACC) for her current operations. Long term borrowings make up 50% of the business's capital. The applicable interest rate paid for this is 8% per annum. The current tax rate that the business pays is 30%. The business is listed on the ASX and information from Bloomberg has calculated that the Beta for it (and other similar listed businesses) is 0.7. Bloomberg also states that the Market Risk Premium is 7% and the Government Bond Rate (risk free rate) is 3%. a. Calculate the cost of Debt Capital for the business (allow for the tax deductibility of the debt). (1 mark) b. Assuming that her business has only ordinary shares, calculate the cost of Equity Capital for the business. (1 mark) c. With your answers in a. and b. calculate the current WACC for Sangita's business that should be used when considering new purchases of equipment. (2 marks) d. If the returns generated by purchasing the new piece of equipment equate to an 9.5% payback, should Sangita go ahead with the investment? Why
Answers
The payback is greater than the cost of capital which is 5.96%. Therefore, the investment is expected to generate a profit greater than the cost of capital.
The cost of Debt Capital can be calculated using the below formulaCost of Debt Capital = (1-t) × kdWhere, t = Tax rate = 30%kd = Interest rate paid for long term borrowings = 8% per annumCost of Debt Capital = (1-30/100) × 8%= (1-0.3) × 8%= 5.6% per annumb. The cost of Equity Capital can be calculated using the below formulaCost of Equity Capital = Rf + β(Rm – Rf)
Where,Rf = Risk-free rate = 3%Rm = Market Risk Premium = 7%β = Beta for the business = 0.7Cost of Equity Capital = 3 + 0.7(7) = 7.9% per annumc. The current WACC for Sangita's business can be calculated using the below formulaWACC = (E/V) × Re + (D/V) × Rd × (1-t)Where,E = Equity = 50%D = Debt = 50%Re = Cost of Equity Capital = 7.9%Rd = Cost of Debt Capital = 5.6%t = Tax rate = 30%V = E + D = Total Capital = 100%WACC = (50/100) × 7.9 + (50/100) × 5.6 × (1-0.3)= 4% + 1.96%= 5.96% per annumd.
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Related Questions
based on recent history, an investor would have a lower risk level with a portfolio consisting of:group of answer choicesall bonds
Answers
Based on recent history, an investor would have a lower risk level with a portfolio consisting of all bonds. Bonds are considered to be less risky investments compared to stocks.
This is because bonds represent a debt obligation of a company or government entity, whereas stocks represent an ownership stake in a company. In the event of a company's bankruptcy, bondholders are paid before stockholders. Additionally, bonds typically provide a fixed rate of return, which makes them a more predictable investment.
Furthermore, during times of market volatility and economic uncertainty, investors often flock to bonds as a safe haven investment. This can lead to an increase in demand for bonds, which can drive up their prices and lower their yields. As a result, investors who hold bonds may see less volatility in their portfolio and more stable returns.
However, it's important to note that no investment is entirely risk-free. Even bonds carry some level of risk, such as the risk of default or inflation risk. Therefore, investors should carefully consider their risk tolerance and investment objectives before constructing a portfolio consisting solely of bonds.
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Complete the following sentence. Remember to spell correctly.
The market is in ___
until the price of goods reflects equal supply and demand.
Answers
Another reason fueling the boom in fast-growing technology services is _____, which, when done right, can virally spread awareness of a firm with nary a dime of conventional ad spending.
Answers
Available options are:
A. Esako and M-Pesa
B. Big data and Business analytics
C. Social media
D. Sproxil
Answer:
Social media
Explanation:
Social media is an internet-based or online platform that allows different registered users to share various forms of information and content, among other users, from anywhere across the globe.
Hence, given the available options, Another reason that is fueling the boom in fast-growing technology services is SOCIAL MEDIA, which, when done right, can virally spread awareness of a firm with nary a dime of conventional ad spending.
TRUE / FALSE. In the capital budgeting process in countries where liquidity is limited, a firm should use a higher discount rate if it has a higher cost of capital.
Answers
The statement "In the capital budgeting process in countries where liquidity is limited, a firm should use a higher discount rate if it has a higher cost of capital" is false because -
The appropriate discount rate should be determined based on the risk characteristics of the investment project and the firm's cost of capital, regardless of liquidity limitations.
In the capital budgeting process, the discount rate represents the cost of capital, which is the minimum rate of return required by the firm to undertake an investment project.
The discount rate reflects the firm's opportunity cost of using its funds in a particular investment instead of alternative investments with similar risks.
In countries where liquidity is limited or where a firm has a higher cost of capital, it does not necessarily mean that the firm should use a higher discount rate in the capital budgeting process.
The discount rate used should reflect the specific risk associated with the investment project and the firm's cost of capital, which includes factors such as the risk-free rate, market risk premium, and the firm's systematic risk.
While limited liquidity or higher cost of capital may influence the firm's overall financial position and the availability of funds, it does not directly determine the appropriate discount rate for capital budgeting.
The discount rate should be determined based on the specific investment project's risk and the required return for the firm to compensate for that risk.
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What was considered a success from the Articles of Confederation?
Answers
Answer: Strengths & Accomplishments
Explanation: Government signed a treaty of alliance with France in 1778. Government successfully waged a war for independence against the British. Government negotiated an end to the American Revolution in the Treaty of Paris, signed in 1783.
an organization’s system of inputs, throughputs, and outputs requires the internal-external feedback loops.
Answers
The primary characteristic of a negative feedback loop is that it can regulate on its own. By damping output, it stabilizes the system around an equilibrium point.
Additionally, it stabilizes after a given period of time, making it balancing feedback. The increase in this system's output stops the feedback system from being created in the future. In this system, the output obtained as feedback is intended to serve as the opposing input. Other choices are erroneous because positive feedback loops exhibit unstable behavior, inverted feedback loops operate in an inverted manner, and convoluted feedback loops are not recognized as technical term. A feedback loop is a method of leveraging a system's outputs as new inputs. This explains the procedure used in the company to enhance a service or good using input from staff or customers (the results of a service or product).
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Match each business model with the advantage it brings.
Answers
Answer:
1. Subscription.
2. Bait and Hook.
3. Cutting out the Middleman.
Explanation:
Some of the commonly used business models across the world include the following;
1. Subscription: steady revenue and predictable profits. It is a business model which typically involves customers paying a recurring fee or price (revenue) for the use of a particular product or service. These customers are usually charged either on a monthly or annual basis. An example is the subscription for paid cable tv by various customers.
2. Bait and Hook: attractive prices for basic product. It is also referred to as the razor and blade business model. Bait and Hook typically involves selling a product at a very low price so as to gain the attention of the buyer and selling a complementary product (refill) to the same buyer at a very high price. An example is a mobile phone (bait) and airtime plus data (hook).
3. Cutting out the Middleman: reduction in transaction costs and processing time. It typically involves the elimination of an intermediary (middleman) in the supply of goods and services to the end users or customers.
An example is the business to consumer (B2C) company such as Walmart, Uber, etc.
Please help me with this!!
A certain country has a balanced economy. This has led to more tax revenue for the government. What is MOST likely the fiscal policy stance that this government takes?
contractionary stance
economic stance
neutral stance
expansionary stance
Answers
Neutral stance is most likely the fiscal policy position that this government takes. As certain country has a balanced economy. This has led to more tax revenue for the government.
What is balanced economy?Balanced economy is defined as the long term economy that has a sustainable growth and development in every sector.
There are numerous features of a well-balanced economy. Low inflation aids to avert an unsustainable boom and bust cycle in the economy.
Thus, option C is correct.
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Businesses use firewalls to protect their networks from internal threats.
O True
False
Answers
Correct on ED2022
How many years would it take for money to increase to 3 times the initial amount at an interest rate of 18% per year?
Answers
Answer:
7 years (to the nearest year)
Explanation:
Given that;
A = amount
P= principal
t = time
r = rate
A =3P(given in the question)
Formula for compound interest;
A = P(1 + r)^t
Substituting values;
3P = P(1 + 18/100)^t
3P/P= (1.18)^t
3 = (1.18)^t
log 3 = t log 1.18
t = log 3/log 1.18
t = 0.4771/0.0719
t = 6.6 years
t = 7 years (to the nearest year)
The following table shows a person's nominal and real wages for three years, as well as the price level (price index) for each year, using the first year as the base year. Fill in the blanks in the table, and then calculate the annual inflation rate for each year (not including the base year).
Instructions: Round your answers to 2 decimal places.
Answers
Answer:
Year Nominal wage Real wage Price level Inflation rate
1 $7 $5 140 Nil
2 $9 $6 150 7.14 %
3 $12 $7.5 160 6.67 %
Explanation:
Note: The table for the question is attached as picture
Price level in Year 1 = (Nominal wage in year 1/Real wage in year 1) * 100
Price level in Year 1 = ($7.00 / $5.00) * 100
Price level in Year 1 = 1.4 * 100
Price level in Year 1 = 140
Real wage in Year 2 = (Nominal wage in year 2 / Price level in year 2) * 100.
Real wage in Year 2 = ($9.00 / 150.00) * 100
Real wage in Year 2 = $6
Nominal wage in Year 3 = (Real wage in Year 3 * Price level in Year 3) / 100.
Nominal wage in Year 3 = ($7.50 * 160) / 100
Nominal wage in Year 3 = $1,200 / 100
Nominal wage in Year 3 = $12
Inflation rate in Year 2 = (Price level in Year 2 - Price level in Year 1) / Price level in Year 1.
Inflation rate in Year 2 = (150 - 140) / 140
Inflation rate in Year 2 = 10 / 140
Inflation rate in Year 2 = 0.0714
Inflation rate in Year 2 = 7.14 %
Inflation rate in Year 3 = (Price level in Year 3 - Price level in Year 2) / Price level in Year 2.
Inflation rate in Year 3 = (160 - 150) / 150
Inflation rate in Year 3 = 10 / 150
Inflation rate in Year 3 = 0.0667
Inflation rate in Year 3 = 6.67%.
Price level in year 1 , Real wages in year 2 , Inflation rate in year 2 and Nominal wages in year 3 are 180, 8, 11.11% and 18 respectively.
Inflation based problem:Missing information is given in the picture below.
Computation:
Price level in year 1 = [NW / RW]100
Price level in year 1 = [9 / 5]100
Price level in year 1 = 180
Real wages in year 2 = NW[100 / Price level in year 2]
Real wages in year 2 = 16[100 / 200]
Real wages in year 2 = 8
Inflation rate in year 2 = \(\frac{Price\ level \ in \ year 2 - Price\ level \ in \ year 1}{Price\ level \ in \ year 1} \times 100\)
Inflation rate in year 2 = \(\frac{200-180}{180} \times100\)
Inflation rate in year 2 = 11.11%
Nominal wages in year 3 = \(\frac{Real \ wages \times price \ level \ in \ year 3}{100}\)
Nominal wages in year 3 = \(\frac{7.50 \times240}{100}\)
Nominal wages in year 3 = 18
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Do you spill the tea or can you keep a secret ?
Answers
Answer:
The phrase "spill the tea," used as an encouragement to gossip, has been used in everything from Harlequin romance novels to "RuPaul's Drag Race"; "no tea, no shade" has been featured in explainers on black gay slang; comedian Larry Wilmore used "weak tea" regularly on his 2015-16 Comedy Central show in response to
The expression "Do you spill the tea or can you keep a secret ?" simply means do you gossip or keep secrets
However, the expression " do you spill the tea describe a condition or situation where one gossip about other people's personal matter.
This goes to say that an individual belongs to any of these two categories:
One who shares people's personal issue with others by gossipingOne who has a closes his/her bucal cavity and does not talk any how. That is; someone who keeps secrets wellWhat is gossiping?This simply means the act of sharing, talking and repeating rumors and personal stories of people to other people
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the poisson distribution describes the number of occurrences within a randomly chosen unit of time or space. (True or False)
Answers
The statement "the Poisson distribution describes the number of occurrences within a randomly chosen unit of time or space" is true.What is a Poisson distribution?The Poisson distribution is a statistical method that is used to predict the probability of an event based on how often it occurs. A Poisson distribution describes the number of events that happen within a random unit of time or space.There are a variety of possible applications for a Poisson distribution. For example, it could be used to model the number of cars that pass through a certain intersection every hour or the number of customers that enter a store during a certain time period.There are certain requirements that must be met in order to use a Poisson distribution. First, events must occur independently of each other. Additionally, the probability of an event must be the same across all units of time or space. Finally, there must be a large number of possible events, but only a few of them can actually happen.
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what are business rules, what is their source, and why are they crucial?
Answers
Business rules are a set of guidelines that define how a business works, processes, and related activities. They are created to help companies manage their business more effectively and efficiently.
Business rules are a set of guidelines that define how a business works, processes, and related activities. They are created to help companies manage their business more effectively and efficiently.Business rules can cover a wide range of topics, from how products are produced to how customer service is provided. They are typically developed by business analysts, who use their expertise and knowledge to define the guidelines that will govern the way a business operates.What is their source?Business rules can come from a variety of sources. They can be created by business analysts, management, or industry experts. They can also be derived from regulations and laws that govern specific industries or business practices, as well as internal policies and procedures that a company has developed to manage its operations.Why are they crucial?Business rules are crucial because they help ensure that a company's operations are consistent and efficient. By defining guidelines for how processes are carried out, businesses can minimize errors and improve the quality of their products or services. They also help ensure that employees are aware of the company's policies and procedures, reducing the likelihood of misunderstandings or miscommunications that can lead to costly mistakes. Additionally, business rules can help companies remain compliant with regulations and laws, reducing the risk of penalties or other legal consequences.
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I need help with the business ventures Pt 3 assignment, I dont know how to do the tables with graphic designing business. I NEED HELP FAST!!!
Answers
Graphic design is a field that creative people with a love of art, technology, and communication might want to consider.
What about graphic design?Graphic design is both a profession and an academic field. and applied art, whose work entails the projection of visual signals meant to convey particular messages to social groups with specific aims. An multidisciplinary area of both the fine arts and design, graphic design is. Using manual or digital technologies, it requires creativity, invention, and lateral thinking. Text and visuals are frequently used to convey ideas graphically.The graphic designer's function during the communication process is that of the message's encoder or interpreter. They focus on the analysis, arrangement, and presentation of visual messages. Graphic design typically goes beyond what language alone can say by using ornamentation, graphics, compositional arrangement of the text, and appealing typography.Graphic design is a field that creative people with a love of art, technology, and communication might want to consider.
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What is the purpose of the Subtotal feature?
Answers
A list of reasons on why could it take 36 years and $61,060 to pay off a $10,000 credit card dept.
Help I need the answer fast
Answers
Answer:
This is due to compound interest on the credit card bills.
Explanation:
Credit card debt of $10,000 is repaid when its due. The bank lends the credit card amount and then charges interest on the debt amount. The compound interest is added to the debt amount and then future value of the debt is greater than the present value.
U.S. businesses consider the Foreign Corrupt Practices Act as legislation that has helped increase their profits abroad.
Answers
It is True that the Foreign Corrupt Practices Act is legislation that has helped increase the profits of American businesses abroad.
What is the Foreign Corrupt Practices Act?The Foreign Corrupt Practices Act (FCPA) is an Act or a US law that makes it illegal for a United States company or person to give or take bribes from any foreign official for the purpose of getting or keeping a business.
While it is true that profits have increased as US-based businesses focus on more ethical ways of getting a business, illicit profits (that is profits from illegally acquired business deals) have dropped drastically.
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Select the correct answer. Which of these do you need to do when receiving criticism? A. Do not respond to criticism. B. Ignore the criticism. C. Respond to criticism with your own criticism. D. Consider the criticism as a learning experience. E. Ask your best friend what to do.
Answers
Answer:
The correct answer is D. Consider the criticism as a learning experience.
Explanation:
Criticism is the opinion valued by a person regarding another, a thing or a situation, in which the characteristics of said person, thing or situation are evaluated, and an opinion is expressed about them, which can be favorable or unfavorable.
When a person receives a criticism without bad intention, that is, a genuine or constructive criticism, the ideal is not to feel attacked by whoever emits it, but on the contrary, to take that opinion as valid, to learn from the mistakes made and improve.
Using the acronym ROTTEN, explain in a few sentences a situation that
a
could have resulted in the increase of supply of iPhones. I
Answers
Answer:
if the supply increases, it could mean that the resources to make Iphones are increased. If there is an abundance of the computer chips Apple uses to make the iphones, the price of the chip lowers , which in turn lowers the cost to make an iphone.
Explanation:
according to mintzberg, which role would a manager assume if she were trying to convince union members to accept a 25-cent-per-hour reduction in pay in order to keep the manufacturing plant open?
Answers
In this situation, the manager primarily assumes the role of a Negotiator, representing the organization's interests and seeking a compromise with union members to accept a pay reduction in order to keep the manufacturing plant open.
According to Mintzberg's managerial roles, in this situation, the manager would primarily assume the role of a Negotiator.
The Negotiator role involves representing the organization's interests and engaging in discussions, bargaining, and persuading others to reach agreements or compromises.
The manager would be responsible for communicating the rationale behind the pay reduction, addressing concerns of the union members, and seeking a mutually beneficial solution that balances the needs of the employees and the organization to keep the manufacturing plant operational.
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Witch of the following is a current asset?
A- Employee
B- Land
C- Supplies
D- Mortage
Answers
9. If $1.00 at 5.5%interest compounded daily
has a value of $1.00513 after 34 days, how
much interest would June Akin's account
have earned on $5,000.00 after 34 days?
(Step by step) please
Answers
Answer:
After 34 days, Akin's bank account would have $5,034.11
Explanation:
Given that 5.5% annual interest, if compounded daily, represents a daily interest of 0.015%, to determine the total amount that Akin's account will have if its initial amount were $ 5,000 after 34 days of investment, the following must be done calculation:
X = 5,000 x (1 + 0.015) 34
X = 5,034.11
Therefore, after 34 days, Akin's bank account would have $5,034.11.
Describe factors that encourage conspicuous
consumption by the purchase of status sym-
bols.
Answers
Veblen's initial thesis said that better social standing and peer recognition were the two key factors influencing ostentatious consumption.
Conspicuous consumerism is the act of acquiring things or services specifically with the intention of flaunting one's affluence. When publicly exhibited products and services are too expensive for other people in a person's class, conspicuous spending is a way to demonstrate one's social position.
What is the conspicuous consumerism theory?
Conspicuous consumption is defined as. Displaying extravagant riches in order to improve one's standing and reputation in society is known as conspicuous spending.To Learn more about conspicuous consumption, click the links
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Why is it important to write a zero-based budget every month?
Answers
Answer:
It is important to write a zero-based budget every month because the zero-based budget ensures that every dollar you make is assigned a specific purpose.
Explanation:
Which of the following should appear in the income statement of a limited
company. I auditors fees, Il debenture Interest, III directors remuneration *
I and II Only
I and Ill only
II and III Only
I, II and III
Answers
Explanation:
I, II and III
If buyers and sellers in a certain market are price takers, then individually:_________
Answers
If buyers and sellers in a certain market are price takers, then individuals can not influence the market price.
Every buyer and seller is aware that it is forbidden to work together to influence the price because of government intervention in the market. Depending on the state of the market price, they might occasionally impact or not influence the market.
In a market with perfect competition, or one in which all businesses sell the same good, there are no barriers to entry or departure, each business has a little market share, and all consumers are fully informed about the market, all economic actors are regarded as price takers.
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In a hypothetical country, Nominal GDP has increased by 5%. Which of the
following must be true? (1 point)
Prices have increased.
Either price, economic output, or both has increased.
The quantity of economic output has decreased.
The quantity of economic output has increased.
Answers
As a result of an increase in nominal GDP, we can infer that Either price, economic output, or both has increased.
Nominal GDP can increase when:
An increase in price makes the final price of goods and services more than it was before An increase in economic output means that more goods and services are being produced that increase GDPThere is also the chance that both of these could happen at the same time. This would increase the Nominal GDP by a higher rate.
In conclusion, a rise of nominal GDP could come from either or both of those factors.
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If you choose to work beyond the age of 67:
a) Your benefits will be permanently reduced
b) You will not gain anything, your maximum benefit is calculated at age 65
C) You will pay increased income tax
d) The government will add 8% per year to your benefits until the age of 70
Answers
Answer:
D : The government will add 8% per year to your benefits until the age of 70
Explanation:
If one chooses to work beyond the age of 68 years that the government will add 8% per year for benefits until the age of 70. Thus option D is correct.
What is working age?The working-age is the age till which a person is supposed to work and is fixed by the age of retirement. For the person aged more than 67 years, the government should provide about 8% years of benefit to the age of 70 years. So if wone chose to work he can easily have a benefit of three more years.
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Quickly changing tooling and fixtures to reduce setup time and achieve higher flexibility and productivity is the principle of _____. Group of answer choices SMED the 5Ss andon Kanban
Answers
Quickly changing tooling and fixtures to reduce setup time and achieve higher flexibility and productivity is the principle of SMED.
SMED stands for Single Minute Exchange of Die. This refers to the concept of carrying out die changes or setups in a single-digit or "single minute" timespan. SMED is a methodology used in lean manufacturing that aims to reduce the time it takes to changeover a manufacturing procedure from one product to another. It helps organizations to become more flexible by reducing the time it takes to respond to new customer demands, which in turn leads to a rise in productivity.
SMED comprises a sequence of measures that aim to streamline the changeover process, leading to a quicker setup time. SMED is divided into two stages: external and internal. The external phase covers activities that can be completed while the production line is still running. In contrast, the internal phase focuses on activities that can only be completed once the production line has been halted. SMED involves two major steps:Identifying and separating external and internal setup stepsConverting as many internal setup steps as possible to external setup steps.To achieve higher flexibility and productivity in manufacturing, SMED implements techniques such as tooling and fixturing to reduce setup time.
Tooling refers to the set of tools, fixtures, and equipment used to manufacture a product. Fixturing, on the other hand, refers to the methods and devices used to hold, position, and support a workpiece during the manufacturing process. Together, these techniques help organizations achieve higher flexibility and productivity.
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