A Corporation has P1,500,000 in debt outstanding. The company's before-tax cost of debt is 10%. Sales for the year is P3,500,000 and variable costs account for 60% of sales. Net income is P600,000. The company's after-tax rate was 60%. If A's degree of total leverage is 1.40, what is its degree of operating leverage? A 1.15 B 1.00 C 1.22 D 1.12
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A Corporation has P1,500,000 in debt outstanding. The company's before-tax cost of debt is 10%. Sales for the year is P3,500,000 and variable costs account for 60% of sales. Net income is P600,000. The company's after-tax rate was 60%. If A's degree of total leverage is 1.40, what is its degree of operating leverage?
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- A company has debt, equity share and overdraft financing. The overdraft is used to finance the day-to-day activities of the company when necessary. The after-tax cost of debt is 12%, the cost of equity is 20% and the after-tax cost of the overdraft is 18%. The market value of debt is R1 000 000, the market value of equity is R2 000 000 and the market value of the overdraft is R500 000. Calculate the company’s weighted average cost of capital (rounded to two decimal places). a. 18.33% b. 17.33% c. 18.43% d. 19.33% e. 17.43%the specifics for a company are as follows: tax rate 35% Equity = 6,300,000 Debt = 4000 x 980 = 3,920,000 Loan (new debt) is given as $2,000,000 Preferred stock = 6,000,000 Cost of equity = 10.91% Cost of Debt (annual YTM) = 8.29% After-Tax cost of Debt = YTM x (1-tax rate) = 8.29% x (1- 0.35) = 8.29 x 0.65 = 5.38% After-Tax cost for Loan (new debt) = interest rate x (1-tax rate) = 3.9% Cost of preferred stock = = 7.5% a) To calculate the weighted average cost of capital (WACC) of the company, should the after-tax cost of debt be used or the cost before tax? give reasons for your answer. b) Calculate the WACC of the company.Rain company whose tax rate is 40% has a total asset of P500,000,000 and earnings before interest and taxes of P200,000,000. The company’s target capital structure is 50% debt funded and 50% equity funded. The cost of new and old debt is constant at 8%. Retention ratio is 40%. 1. Determine the interest payment of Rain Company. 2. How much is the net income?
- Assume that your company has $1,400,000 in debt outstanding, the before-tax cost of debt is 10 percent, sales for the year total $3,500,000 (1,000,000 units sold), variable costs were 60 percent of sales, net income was equal to $600,000, and the company's tax rate was 40 percent. If the company's degree of total leverage is equal to 1.40, then given the information above, determine the firm's dollar fixed costs. $275,000 $260.000 $300,000 $250,000 $240,000A company has 35% of its balance sheet as debt with a total amount of assets of EUR 17,000,000.If the company's cost of equity is 4% and its cost of debt 2%, and considering the corporate tax rate of 30%, what is the company's WACC (Weighted average cost of capital)?A company finances its operations with 57 percent debt and the rest using equity. The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%
- You have the following data for your company. Market Value of Equity: $520 Book Value of Debt: $130 Required rate of return on equity: 12% Required rate of return on debt (pre-tax): 7% Corporate tax rate: 25% The company's debt is assumed to be is reasonably safe, so the book value of debt is a reasonably approximation for the market value of debt. What is the weighted average cost of capital for this company?. Young Enterprises has $2 million in assets, $400,000 of EBIT, and has a 40% tax rate. The firm also has a debt to assets ratio of 60% and pays 12% interest on its debt. What is Young's ROE? a. 19.20% b. 17.40% c. 17.10% d. 16.80%Choose the correct letter of answer: In the current year, Company A had P15 Million in sales, while total fixed costs were held to P6 Million. The firm's total assets at year-end were P20 Million and the debt/equity ratio was calculated at 0.60. If the firm's EBIT is P3 Million, the interest on all debt is 9%, and the tax rate is 40%, what is the firm's return on equity? a. 11.16%b. 14.4%c. 18.6%d. 24.0%e. 28.5%
- Company A is financed by 20% of debt and the rest of the company is financed by common equity. The company’s before-tax cost of debt is 5%, and its cost of equity is 11%. If the marginal tax rate is 30%, the company’s weighted average cost of capital (WACC) is _____.A company's capital structure consists of 25% debt and 75% common equity. The company has a 20% tax rate, and the cost of equity is 146. What is this company's difference in weighted average cost of capital (WACC) if the cost of debt is 6% at market value and 5% at book value and the cost of equity is 12 %? a. 0.19% b. 0.25% (b is correct, I just don't understand how.)c. 10% d. 11%Company A has a debt to equity ratio to one. Its cost of equity is 20% and its cost of debt is 10%. Assuming a tax rate of 50%. Company A's weighted average cost of capital is? (write the process of calculation.)