the weighted average cost of capital. After-tax cost 6% 10% 14% S. Given the fol
ID: 2806862 • Letter: T
Question
the weighted average cost of capital. After-tax cost 6% 10% 14% S. Given the following information, calculate Proportion 30% 20% 50% Long-term debt Preference shares Ordinary shareholders' equity A. 9.4% B. 12.0% C. 7.0% D. 12.8% expected return to A is 10%, to B is 12% and to C is 14%, what is the expected return on the portfolio? 6. If you put $26,000 in asset A, $33,000 in asset B, and $55,000 in asset C, and if the A. 0.250 B. 0.125 C. 0.228 D. 0.143 7. Which statement related to the 'signalling effect' is true? A·The signaling effect can explain why an increase in the dividend if often followed by an increase in share price B. The signaling effect is a reason a firm may follow a constant or steadily increasing dividend policy C. Changes in dividends can be interpreted as a signal from management about changes in the company's future earnings D. All of the above 8. Which of the following would usually be the most credible positive dividend signal? A. A dividend increase when eanings are down B. A dividend increase when earnings are up C. A dividend decrease when earnings are down D. A dividend decrease when earnings are up A firm's balance sheet discloses cash of $300,000, other assets of $700,000, liabilities of s500,000, preference shares of $100,000, ordinary shares of $200,000, and retained earnings of $200,000. What is the maximum cash dividend the firm can pay? 9. A. $100,000 B. S300,000 C. $200,000 D. $500,000Explanation / Answer
5-
weight
cost
weight*cost
debt
0.3
6
1.8
preference
0.2
10
2
ordinary
0.5
14
7
weighted average cost of capital
10.8
no answer is matching
6-
value of investment
weight
cost
weight*cost
A
26000
0.22807
10%
0.022807
B
33000
0.289474
12%
0.034737
C
55000
0.482456
14%
0.067544
total
114000
weighted average cost of capital
0.125088
answer is B
9-
A
total of assets-total of liabilities and shareholders equity = 100000
300000+700000-500000-100000-200000-200000 =100000
8-
B
A dividend increase when earnings are up
7-
D
all of the above
5-
weight
cost
weight*cost
debt
0.3
6
1.8
preference
0.2
10
2
ordinary
0.5
14
7
weighted average cost of capital
10.8
no answer is matching
6-
value of investment
weight
cost
weight*cost
A
26000
0.22807
10%
0.022807
B
33000
0.289474
12%
0.034737
C
55000
0.482456
14%
0.067544
total
114000
weighted average cost of capital
0.125088
answer is B
9-
A
total of assets-total of liabilities and shareholders equity = 100000
300000+700000-500000-100000-200000-200000 =100000
8-
B
A dividend increase when earnings are up
7-
D
all of the above
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