Answer:
Option (D) is the right choice.
Explanation:
According to the Modigliani-Miller proposition, the cost of equity will adjust in a way to accommodate its debt obligations.
Cost of equity:
= WACC for an all-equity firm + (WACC for an all-equity firm - Cost of debt ) × (Debt-to-equity ratio)
Initially, when no debt was present,[ [TAG_20]]
WACC = cost of equity = 10%
The levered cost of equity:
= 10% + ( 10% - 6%) × 0.2
= 10.8%
Thus, Taggart's levered cost of equity would be approximately 11%.
Answer:
$21,370.1071
Explanation:
The calculation for the present value of this perpetuity is as follows:
= Present value five years later + present value at the time of purchase
where,
The present value after five years is
= ($1,000) ÷ (1.04)^5
=$821.9271
Additionally, the present value at the purchase time is
= $821.9271 ÷ 4%
=$20,548.18
Thus, the total present value of the perpetuity is
=$821.9271 + $20,548.18
= $21,370.1071
a. Using FIFO, the Cost of Goods Sold (COGS) is $17,640, while the Ending Inventory equals $12,960.
b. Under LIFO, COGS totals $19,160, while the Ending Inventory is $11,440.
c. The Weighted Average COGS is $18,360, and the Weighted Ending Inventory is $12,240.
For Cortez Company, the inventory particulars include initial stock of 100 units from $60/unit amounting to $6,000, first batch purchase of 150 units at $68 each totaling $10,200, and a second batch of 200 units at $72 each totaling $14,400, culminating in a total of 450 units valued at $30,600.
Queries about how COGS and Ending Inventory figures manifest under various methods (FIFO, LIFO, and Weighted Average) can be addressed based on those computations.
