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Andrew
14 days ago
7

Nelson's Landscaping has 1,200 bonds outstanding that are selling for $990 each. The company also has 2,500 shares of preferred

stock at a market price of $28 a share. The common stock is priced at $37 a share and there are 28,000 shares outstanding. What is the weight of the common stock as it relates to the firm's weighted average cost of capital?
Business
1 answer:
soldi70 [3.1K]14 days ago
8 0

Answer:

The proportion of common stock = 45%

Explanation:

WACC represents the average expense associated with a company's long-term financing options. Each financing source is assigned a weight based on its market value as a fraction of the overall market value of the funds available.

To determine the weight of common stock, we will proceed with the following steps

below:

Step 1

Compute the total market value of all funding sources

Market value of common stock

Bonds = $990 × 1,200 = $1,188,000

Preferred Stock = $28 × 2,500 = $70,000

Common stock = $37 × 28,000 = $1,036,000

Total market value = 1,188,000 + 70,000 + 1,036,000

= $2,294,000.00

Step 2

Determine the weight of common stock

The weight of common stock = ($1,036,000 / $2,294,000.00) × 100

= 45%

The proportion of common stock = 45%

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A manufacturer of plastic canoes and fiberglass kayaks is experiencing an increase in the price of kayaks in the marketplace, wh
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An increase in the price of soccer balls.

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1 month ago
Chris owns his own business restoring antique cars. Last year, he restored 24 cars, which he sold for $1,100,000. The parts and
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Answer:

  1. a. $950,000.
  2. $150,000.
  3. a. $1,115,000.
  4. d. -$15,000.
  5. b. the difference between what a person currently makes and what they would earn in their best alternative.

Explanation:

1. Chris's accounting costs

The accounting cost reflects the explicit expenses of the venture. They are the usual costs;

= Parts and materials needed for restoration + Salaries of employees + His salary + Rent along with utilities

= 400,000 + 360,000 + 110,000 + 80,000

= $‭950,000‬

2. Chris's accounting profits

= Revenue - Accounting cost

= 1,100,000 - 950,000

= $150,000

3. Chris's economic cost

These consist of explicit costs plus implicit (opportunity) costs.

The opportunity cost represents the next best option which amounts to $275,000 should he have taken the position with Jay Leno as a personal auto restorer.

This means forgoing the $110,000 he makes currently.

= Accounting cost + Foregone salary - Current salary

= 950,000 + 275,000  - 110,000

= $1,115,000

4. Chris's economic profit

= 1,100,000 - 1,115,000

= -$15,000

5. b. the difference between what a person currently makes and what they would earn in their best alternative.

7 0
27 days ago
Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead
soldi70 [3150]

Answer:

(a) Predetermined overhead rate for the entire plant:

=\frac{Total\ manufacturing\ overhead}{Total\ direct\ labor\ hours}

=\frac{23,400,000}{780,000}

= 30

Applied manufacturing overhead for Job A:

= Total hours of direct labor × Predetermined overhead rate for the plant

= 15 × 30

= 450

Applied manufacturing overhead for Job A:

= Total direct labor hours × Plantwide predetermined overhead rate

= 9 × 30

= 270

(b) Department-specific predetermined overhead rates:

Machining =\frac{Manufacturing\ overhead}{Machine\ hours}

Machining =\frac{22,500,000}{750,000}

= 30

Assembly =\frac{Manufacturing\ overhead}{Labor\ hours}

Assembly =\frac{900,000}{750,000}

= 1.2

Applied manufacturing overhead for Job A:

= (Machining machine hours × 30) +  (Assembly direct labor hours × 1.2)

= (11 × 30) +  (10 × 1.2)

= 330 + 12

= 342

Applied manufacturing overhead for Job B:

= (Machining machine hours × 30) +  (Assembly direct labor hours × 1.2)

= (12 × 30) +  (5 × 1.2)

= 360 + 6

= 366

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1 month ago
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