Beauty Inc plans to maintain its optimal capital structure of 40 percent debt, 10 percent preferred
stock, and 50 percent common equity indefinitely.
The required return on each component source
of capital is as follows: debtN8 percent; preferred stockN12 percent; common equityN16 percent.
Assuming a 40 percent marginal tax rate, what after-tax rate of return must the firm earn on its
investments if the value of the firm is to remain unchanged?
A) 10.64 percent B) 12.00 percent C) 12.40 percent D) 11.12 percent
D
You might also like to view...
Termination of the partnership agreement, bankruptcy of the firm, or death of one of the partners dissolves the partnership
a. True b. False Indicate whether the statement is true or false
A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:
a. an overstatement of inventory on the year-end balance sheet. b. an understatement of gross profit in the following year. c. an overstatement of retained earnings at the end of the year. d. an overstatement of cost of goods sold for the current year.
Glisten Co. leases an office to a tenant at the rate of $3,000 per month. The tenant contacted Glisten and arranged to pay the rent for December on January 8 of the following year. Glisten agrees to this arrangement. a) Prepare the journal entry that Glisten must make at year ended December 31 to record the accrued rent revenue.b) Prepare the journal entry to record the receipt of the rent on January 8 of the following year (Assume no reversing entries were made).
What will be an ideal response?
Which statement highlights weak uncertainty avoidance?
a. One group's truth should not be imposed on others. b. Scientific opponents cannot be personal friends. c. Citizen protest should be repressed. d. Negative attitudes are expressed toward young people.