alexandergoetz4857
03.12.2021 •
Business
Ophelia Org. uses the indirect method to determine net cash provided by operating activities. During 2017, Ophelia experienced a decrease in Accounts Receivable of $10,000, a decrease in Accounts Payable of $15,000, and Amortization Expense of $6,000. What should be reported as the net cash provided by operating activities if net income was reported at $100,000 and dividend payments were $25,000
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Ответ:
13.75%
Explanation:
Data provided in the question:
Total expenditure = $16 million
Debt = $2 million
Preferred stock = $4 million
Common stock = $10 million
After-tax cost of debt = 7% = 0.07
Cost of preferred stock = 9% = 0.09
Cost of retained earnings = 14%
Cost of new common stock = 17%
Now,
Weight of debt = $2 million ÷ $16 million
= 0.125
Weight Cost of preferred stock = $4 million ÷ $16 million
= 0.25
Weight Cost of new common stock = $10 million ÷ $16 million
= 0.625
The weighted average cost of capital for this project
= ( 0.07 × 0.125 ) + ( 0.09 × 0.25 ) + ( 0.17 × 0.625)
= 0.00875 + 0.0225 + 0.10625
= 0.1375
or
= 0.1375 × 100%
= 13.75%