Due to mismanagement, Pakistan Steel Mills is currently over levered with a debt to capital ratio of 80% and a pre-tax cost of debt of 8%. Management of Pakistan Steel Mills is considering a restructuring that will reduce the company's debt to capital ratio to 40% and its pre-tax cost of debt to 6%.
Current:
Debt/(Debt+Equity) = 80%
Cost of Debt (pre-tax) = 8%
Cost of Equity = 24.10%

Recapitalised:
Debt/(Debt+Equity) = 40%
Cost of Debt (pre-tax) = 6%
Cost of Equity = ?

If the marginal tax rate is 25%, the risk-free rate is 2.5%, and the equity risk premium is 6%, estimate the cost of capital after the restructuring.

Answers

Answer 1

The estimated cost of capital after the restructuring is 10.82%.

Using the MM Proposition II with taxes, we need to first calculate the Cost of unlevered equity;

Cost of unlevered equity = (Cost of levered equity+cost of debt*D/E*(1-tax rate))/(1+D/E*(1-tax rate))

Cost of unlevered equity = (24.10% + 8%*80%/20%*(1-25%)) / (1+80%/20%*(1-25%))

Cost of unlevered equity = 12.03

Cost of levered equity = Cost of unlevered equity + (Cost of unlevered equity-Cost of debt)*D/E*(1-tax rate)

Cost of levered equity = 12.03% + (12.0250%-6%)*40%/60%*(1-25%)

Cost of levered equity = 15.04%

Cost of capital (WACC) =40%*6%*(1-25%)+60%*15.0375%

Cost of capital (WACC) = 0.018 + 0.090225

Cost of capital (WACC) = 0.108225

Cost of capital (WACC) = 10.82%

In conclusion, the estimated cost of capital after the restructuring is 10.82%.

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Related Questions

Isabel and Stuart open a money market account to begin saving for the

college expenses of their newborn daughter. This is an example of a

investment strategy.

O A. high-return

B. diversified

C. long-term

O D. high-risk

SUBMIT

Answers

Considering the situation described above, this is an example of a "Long-Term investment strategy."

What is a Long-Term Investment Strategy?

Long Term Investment Strategy is a type of investment decision in which the investor hopes to reap the rewards later, usually five years or more.

Given that Isabel and Stuart opened a money market account to begin saving for the college expenses of their newborn daughter, which may take an average of 16 years or more before they reap it, this is an example of a "Long-Term Investment Strategy."

Hence, in this case, it is concluded that the correct answer is "Long-term investment strategy."

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Answer: C, long-term

Explanation: just finished test

Export Production,

Increases the country's stock of wealth

Allows family members to make productive use of their time

Saves money on imports

Produces enough to support the needs of the community

Answers

Answer:

Increases the country's stock of wealth

Explanation:

There are two types of businessesImportExportImport means to buy things which are made otherwhere from other countries to our own country.Export means to transfer things which are made in our country to outside

The total dollar value of consumption, investment, government spending, exports, and imports is provided in the table above. What is the GDP of this fictional country?

Possible answers are:
$12,000,000
$9,000,000
$8,000,000
$10,000,000

Answers

The GDP of this fictional country is $ 8,000,000 (option C)

What is the GDP?

Gross domestic product (GDP) is a term to refer to a macroeconomic magnitude that expresses the monetary value of the production of goods and services in final demand of a country or region during a period, usually one year.

There are several ways to know the GDP of a country, the simplest is a mathematical operation that includes the following data:

The consumption of households and non-profit institutions.The investment of companies and families.The final consumption expenditure of the public sector.The value of net exports.The value of imports.

The operation states that we must add the first four indicators and subtract the last one. According to the information provided in the fragment, the operation would be:

5 + 2 + 2 + 1 - 2 = 8

According to the above, the GDP of this fictitious country is $ 8,000,000 (option C)

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If the demand for a product decreases, what is likely to happen?
A.
The supply is likely to increase.
B.
The demand is likely to be inelastic.
C.
The price is likely to increase.
D.
The price is likely to decrease.

Answers

D, the price is likely to decrease

The United States and Canada have the production possibilities curves shown above. It is determined that the United States has the comparative advantage in peanuts. Will both nations gain from trade if the terms of trade that are offered are 1 Peanut= 2 Corn? Why or why not? Show your work.

Answers

In an exchange term in which 1 peanut is offered in exchange for 2 corn, the United States benefits because it has a greater capacity to exchange peanuts, so it can obtain more corn.

The graph shows the production capacity of the United States and Canada to produce corn and peanuts. In the case of the United States, it has the capacity to produce 60 of each product while Canada only has the capacity to produce 60 of corn and 20 of peanuts.

According to the above, if an exchange is established between the two countries in which 1 peanut is exchanged for 2 corn, the United States would have an advantage since they have more peanuts to offer and the amount of corn they would receive at change would be greater (maximum 160 corn)

On the other hand, Canada only has the capacity to change 20 peanuts, which is equivalent to 40 corn. So the United States is at an advantage because it has more peanuts to offer and would have a greater reception of corn.

Note: This question is incomplete because the graph is missing. Here is the graph.

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All of the following are examples of labour intensive industry EXCEPT: *
1 point
Psychiatry
teaching
manufacturing
sports coaching

Answers

Answer:

Psychiatry

How?

Teaching is a capital intensive industry as it's depends upon the people and trade.Sports coaching is a industry and it also involves the intention of trade.Manufacturing also has intense of trade.Psychiatry doesn't has the intention of trade so it's the answer

Jensen Manufacturing Corp wants to buy land for a distribution center in a new industrial park near Oakland International Airport. They made their offer in the name of Western Associates, LLC so as to not alert their competitors of the attempted purchase. Jensen Manufacturing is which type of principal?

Answers

Based on the information given regarding Jensen Manufacturing Corp, it can be deduced that it's a partially disclosed principal.

A partially disclosed principal simply means a principal whose agent reveals that he has a principal but the true identity of the person isn't known.

From the information given, since Jensen Manufacturing Corp wants to buy land for a distribution center in a new industrial park near Oakland International Airport and made their offer in the name of Western Associates, LLC so as to not alert their competitors of the attempted purchase. This is a partially disclosed principal.

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4/ "People 3. How can you are attracted to the poultry farming these days" Explain with practical examples.people are attracted to the poultry farming these days explain with particle example ​

Answers

we can attracted to the poultry farming these days by saying eveyone to involve in this work and be excited

Niki makes the same payment every two months to pay off his $61,600 loan. The loan has an interest rate of 9. 84%, compounded every two months. If Niki pays off his loan after exactly eleven years, how much interest will he have paid in total? Round all dollar values to the nearest cent. A. $39,695. 48 b. $10,294. 26 c. $3,126. 29 d. $39,467. 12.

Answers

The total amount of interest paid by Niki is  $39,695.48.

The loan is termed as the amount that is borrowed by the lender and is paid off back at some defined amount of interest.  

Computation of amount of interest to be paid by Niki:

 

The given information is:

 P is the periodic payment.

PV = $61,600

r = 0.0984

t = 6

n = 11 years  

[tex]\begin{aligned}PV = \frac{P(1 - (1 +\frac{r}{t}^{nt}))}{\frac{r}{t}}\end{aligned}[/tex]

[tex]\begin{aligned}61600 =\frac{P(1 - (1 +\frac{0.0984}{6}^{11\times6})}{\frac{0.0984}{6}}\end{aligned}[/tex]

[tex]\begin{aligned}61600 =\frac{P(1 - (1 + 0.0164)^{66} )}{ 0.0164}\end{aligned}[/tex]

[tex]61600\times0.0164 = P(1 - (1.0164)^{66} )[/tex]

[tex]\begin{aligned}1010.24&=p\times(1-0.341769)\\1010.24&=0.658321\times p\\p&=\frac{1010.24}{0.658321}\\p&=1534.78\end{aligned}[/tex]

Niki pays $1534.78 every two months continuously for eleven years.

[tex]\begin{aligned}\text{The total payment made by Niki} &= \text{Tenure Period} \times 6 \times \text{Amount of interest}\\\text{The total payment made by Niki}&=11\times6\times\$1534.78\\\text{The total payment made by Niki}&= \$101295.48\end{aligned}[/tex]

[tex]\text{Interest paid} = \text{Total Payment} - PV\\\text{Interest paid} = 101295.48-61600\\\text{Interest paid} =\$39,695.48[/tex]  

Therefore, the correct option is A.

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i am so coufued "what i am going to in future, i am very good in art and math and cooking and pe?

Answers

Answer:

you can be a artist or chef

Answer:

You can start up an art themed restaurant.

Explanation:

You are very talented, you could even enter cooking shows to practice and improve on ur cooking skills.

Very many people have are paintings in their homes, selling your art could earn you plenty of income.

PLEASE MARK BRAINLIEST :))

Charity Hospital is holding its annual gala in a fancy downtown hotel. Tickets are $200 each, and the organization estimates that the fair value of the event is $125. Purchasers of gala tickets are entitled to a charitable contribution deduction of:

Answers

Based on the amount paid for the tickets and their fair value, the portion that is entitled to charitable contribution deduction is $75.

When one buys a ticket to a charitable event, there is a chance that some of the ticket price can be treated as a charitable contribution deduction.

The part that can be treated as such is anything in excess of the fair value of the ticket. This amount in this case is:

= 200 - 125

= $75

In conclusion, the answer is $75.

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Each student ticket for an art museum costs $12. 50. The total cost for student tickets, t, varies directly as the number of tickets, s, purchased. Write an equation that models the proportional relationship between t and s.

Answers

The equation for the computation of the total cost for students tickets is [tex]t=\$12.5 \times s[/tex]

The total cost is referred to as the expense that is done to acquire any of the material or the thing from the market. This is the cost that is incurred by the consumer as well as the manufacturers.

The computation of the total cost:

[tex]\begin{aligned}\text{Total Cost}&= \text{Price of Per Unit} \times \text{No. of Persons}\\ t& =\$12.50 \times s\end{aligned}[/tex]

where t = Total Cost

            s = Number of Persons.

Therefore, the correct equation formed is [tex]t=\$12.5 \times s[/tex]

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What are levels of production? *
1 point
Amount of goods produced
Primary production
Producing at the Secondary level
Tertiary Production

Answers

Answer: it could be amount of goods produced if you are speaking economics (evidence: In general, economic production efficiency refers to a level of maximum capacity in which all resources are being fully utilized to generate the most cost-efficient product possible. At maximum production efficiency, an entity cannot produce any additional units without drastically altering its production process.) otherwise it would be primary production.

answer: (in economics) amount of goods.

answer (in general) primary production.

Answer:

Amount of good produced

Explanation:

The amount of goods produced by a country decides the level of production of that countryIf it's not good the country has to improve this This is key factor behind development

Peter has three daughters who are eligible students. What is the maximum amount of tax credit available to him under the American opportunity credit, assuming he meets all requirements

Answers

Based on current tax laws, the maximum amount of tax credit available to Peter is $7,500

Under the American Opportunity Tax Credit (AOTC):

Tax credit can be earned on eligible students. A maximum of $2,500 can be received as tax credit per student.

Peter has three daughters and they are all eligible students which means that the maximum credit available is:

= 2,500 x 3 students

=  $7,500

In conclusion, Peter can get $7,500 in tax credit.

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Mary, who is licensed as an agent in State A, got a promotion and will turn her clients over to Julie, who is licensed only in State B. Before Julie can take over the accounts, she must A) register with State A B) receive permission from each of those clients C) register with FINRA D) register with the NYSE

Answers

Julie, who is taking over the clients of Mary in State A, but registered in State B, must first A) register with State A.

Julie does not need permission from all the clients in State A.  It is not required that she must register with FINRA or the NYSE because she was registered before.

Thus, Julie only needs to register with State A to take over Mary's clients in State A.

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True or False: In some small-market teams, current players who originally commanded a small salary but who have greatly succeeded on the team can become too expensive for the team to re-sign.

Answers

There are different kinds of market. In some small-market teams, current players who originally commanded a small salary but who have greatly succeeded on the team can become too expensive for the team to re-sign is a true statement.

There are a lot of terminology of professional sports in North America. A lot of teams are often based in the media market.

A small market team is known to have some form of  struggle as they compete financially against teams from larger markets

Because of this, they may be outbid in the competition for top talent. In most small-market teams, their main players who have achieved great success on the team can become too expensive for the team to re-sign them this is because they have become too big and they can no longer afford them.

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Answer:true

Explanation:

i got it right

as susie left for work, she said "goodbye" to her husband and slammed the door. the loud sound of the door made her husband flinch. after many mornings of hearing "goodbye" followed by a door slam, her husband flinches when he hears her say "goodbye." in this scenario, hearing the word "goodbye" is the

Answers

In this scenario, hearing the word "goodbye" is the: conditioned stimulus.

Classical conditioning can be defined as a learning process through which two (2) stimuli are paired together repeatedly. Thus, it is a learning process which typically involves pairing two (2) stimuli, so as to help an individual anticipate an event that he or she has a reaction for.

In classical conditioning, the two (2) stimuli that are paired repeatedly include the following:

Unconditioned stimulusConditioned stimulus

A conditioned stimulus refers to a neutral stimulus that eventually triggers a conditioned response, after it is repeatedly paired (associated) with the unconditioned stimulus.

In this example, hearing the word "goodbye" is the conditioned stimulus because it made Susie's husband to elicit a response, which is flinching.

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How can you say that Economics is a science of choice??​

Answers

Answer:

Your answer is attached above

hope it helps

and I want to talk to you kavya sis

It's really important plzz dont ignore plzzz

How are NAFTA, the EU, and ASEAN similar

Answers

Answer:

Each decreases trade barriers among neighboring nations.

Explanation:

After listing a home with a broker, the seller told the broker NOT to disclose a major structural defect in the house. What should the broker do

Answers

Answer:

he should not disclose a major structural defect in the house

a nation can increase its production possibilities by

Answers

Answer:

Improvement in labor productivity, increase in resources, and technological advancements

Explanation:

In Roger Arnold's text entitled, "Macroeconomics" (2019), a nation can increase its production possibilities and achieve economic growth through an improvement in labor productivity, an increase in its resources, and technological advancements.

A nation is said to be productive efficient if it can produce the maximum amount of goods with its existing resources and technology.  Hence, it is essential for a nation to take advantage of the productive capabilities of its workforce with specialized trade, which could also increase the production of consumer goods and trading of specialized services.

An increase in resources enables a nation to produce greater quantities of military and civilian outputs. Technological advancements also allow a nation to increase its productive capabilities, thereby enabling them to produce goods with a fixed amount of resources, or produce the same amount of output with lesser resources used.  

A thrifty shopper wants to purchase a new phone that is made with quality parts. What factors should they consider?
High quality phones contain rare earth metals that are a less scarce resource and cost less to the consumer.
High quality phones contain rare earth metals that are a less scarce resource and cost more to the consumer.
High quality phones contain rare earth metals that are a more scarce resource and cost more to the consumer.
High quality phones contain rare earth metals that are a more scarce resource and cost less to the consumer.

Answers

People have different kinds of preference. The factor that should they consider is High quality phones contain are earth metals that are a more scarce resource and cost more to the consumer.

There are some traces of Rare earth metals in different quantities found in smartphones. They includes; Neodymium, dysprosium, praseodymium, terbium, etc., which are found inside displays and other electronic parts of smartphones.

These rare earth metals used in high quality smartphones is known to  give a   striking  beautiful colors such as green, blue, etc., due to their luminescent property. They are known to also make smart-phones vibrate amidst other functions.

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Answer:

C

Explanation:

What was one result of the Bretton Woods system?
A. The U.S. dollar became backed by gold for the first time.
B. The U.S. dollar was no longer accepted in most countries.
C. The U.S. dollar became more valuable and influential.
D. The U.S. dollar lost its status as the world's reserve currency.

Answers

One of the results of the Bretton woods system was that the U.S dollar became more valuable and influential.

What is Currency?

Currency is a medium for exchange for goods and services. It is a form of legal tender approved by the government and accepted by all as a means of exchange.

The U.S dollar is a popular form of currency that is accepted by most countries as a form of exchange. After the Bretton Woods system was adopted, the U.S dollar became more influential and valuable to many.

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#SPJ1

Suppose you are a purchase manager who is the contract administrator for a major consulting firm installing a major enterprise resource planning system such as SAP or Oracle. What are some of the key elements that you would wish to include in the contract with the consulting company implementing this system?

Answers

The key elements that should be included in the contract include the right to work independently, and the avoidance of liability.

It should be noted that enterprise resource planning is important as it helps a firm manage and integrate the vital parts of the activities in the business.

From the complete information, the elements that should be included in the contract with the consulting company implementing this system include the right to work independently, and the avoidance of liability.

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4. what influence may rising house prices have on inflation?

Answers

Answer:

Explanation:

There is a correlation between inflation and house prices. ... When interest rates are low, buying homes can be more affordable and increase the demand for homes. If the supply of homes remains constant and the demand increases, then the prices of homes will increase.

Max is a newly licensed real estate agent. He gets a position with a brokerage firm that plans to pay him commissions, not a salary. What kind of contract might Max want to make with his new firm

Answers

The type of contract which Max would have to draw up for his firm which is based on commissions and not salary is:

An independent contractor agreement

Based on the given question, we can see that max is a licensed real estate agent who gets a job with a brokerage firm and he is expected to make commissions instead of having a fixed salary.

With this in mind, the type of salary which Max would have to make with his new firm would be an independent contractor agreement because this would help him to work with more freedom and close sales and collect his commissions.

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what difference would it make to the economy if there were no money? What commodities might serve as money instead? Provide reason for your answers.

Answers

Answer:

Well, we would simply be reduced to a barter economy. Therefore we would have to trade items for items.

Explanation:

This is the way it is because "Barter" is The exchange (goods or services) for other goods or services without using money. So if we needed beef, we would have to give the person trading the beef something of ours. As for countries who want to trade, if one needs wool, and one needs iron, and country A has Iron and country B has wool They'd barter the two items.

Ria is an Indian student who was admitted to a US university. Her annual tuition is $42,000. She has to pay her tuition fees in US dollars. She needs to calculate how many Indian rupees she will need to buy one dollar. The dollar to rupee exchange rate is 63. 76 and rupee to dollar exchange rate is 0. 15. How many Indian rupees will Ria need to buy one dollar? A. 50. 00 rupees B. 56. 00 rupees C. 63. 76 rupees D. 76. 63 rupees.

Answers

The Ria will need 63. 76 rupees Indian Rupee to buy one dollar.

The value of the rupee in terms of the dollar is 63.76 rupees and the value of the dollar in terms of the rupee is 0.015$.

Therefore, to pay fees of the annual tuition of amount $42000, she would be paying:

[tex]\begin{aligned}1 \:\rm Dollar &= 63.76\:\rm Rupees\\42000 \:\rm Dollar &= 63.76 \:\rm Rupees \times 42000 \:\rm Dollar\\&= 26,77,920 \:\rm Rupees\end{aligned}[/tex]

Therefore, the correct option is C.

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A contractor can spend at most $350 a day on operating costs and payroll. It costs $75 each day to operate the forklift and $55 a day for each crew member. Write an inequality to represent the contractor's budget for the day. 75 55x ≥ 350 75 55x ≤ 350 75x 55 ≥ 350 75x 55 ≤ 350.

Answers

An inequality to represent the contractor's budget for the day is [tex]75 + 55x \leq 350[/tex].

Let the number of crew member be x.Let the forklift operating cost be F.Let the total cost be T.Let the payroll be P.

Given the following data:

Total expense [tex]\leq[/tex] $350

Forklift operating cost = $75

Payroll for each crew member = $55

To write an inequality to represent the contractor's budget for the day:

The contractor's budget for the day on operating costs and payroll must not exceed $350. Thus, the mathematical expression (inequality) for the contractor's budget in a day is represented as follows:

[tex]F+Px \leq T[/tex]

Substituting the given parameters into the formula, we have;

[tex]75 + 55x \leq 350[/tex]

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nonoperating items that increase net income, such as gains on the sale of fixed assets, must be added in calculating operating cash flows.

Answers

There are gains on sale of fixed asset which are known to enter on income statement. Nonoperating items that increase net income must be added in calculating operating cash flows is a false statement

A gain on the sale of fixed assets is usually seen in the statement of profit and loss as non-operating income.

A Non-operating assets are simply described as a kind of assets that does not look into to be part of a company's core operations.

A company's non-operating assets can be said to be unused land, leftover and unused equipment, investment securities, etc.

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