Answer:
The Weighted Average cost of capital measures the cost to the company of its current capital structure by using the weights of the various capital measures. WACC usually uses market values so;
Total amount = Debt + Preferred stock + common equity
= 100 million + 20 million + ( 50 * 6 million)
= $420 million
<u>Proportions.</u>
Debt
= 100/420
= 24%
Preferred Stock<u> </u>
= 20/420
= 5%
Common Equity
= 300/420
= 71%
Answer:
I have to identify the risk factors in the project and then gauge the willingness of the company to take such risks.
Explanation:
Risk tolerance is the willingness of an organization or an individual to take certain risks. The risk tolerance level of a person or organization can be classified as either high or low. For a project manager who wants to determine the risk tolerances associated with his project, he has to first identify the risk factors, and then try to know the risk level and if indeed this level is acceptable within the organization's culture and standard.
The project manager would do well to plot a graph that would show the probability of a risky action happening or not. A risk tolerance line is now obtained from where the project manager can know if that risk is tolerable by organization standards. The extent of job security would also help in determining the amount of risk a manager can take. However, they are still expected to stay within the standards of the organization.
Answer:
Option a
Explanation:
In simple words, value maximization refers to the process under which the managers of an organisation tries to make or increase the existing economic profits, that is, the money left with the organisation after paying for the obligations of all the money providers including the lat in hierarchy, the equity shareholders.
Value maximization can be performed by changing the capital structure which affects the payment obligations. The value maximization affects all the stakeholders of the organisation therefore, the decision should be made by tasking into consideration them all.
Answer:
c. 32.99%
Explanation:
Risk yield = bond yield*(1 - Federal tax rate)
6.50% = 9.70%*(1 - Federal tax rate)
1 - Federal tax rate = 6.50%/9.70%
Federal tax rate = 1 - 6.50%/9.70%
= 32.99%
Therefore, The federal tax rate that you are indifferent between the two bonds is 32.99%