QUESTIONS ON CHAPTER 15 (COST OF CAPITAL) 1.) The Wind Rider Company has just issued a dividend of $2.10 per share on its common stock. The company is expected to maintain a constant 7% growth rate on its dividends indefinitely. If the stock sells for $40 a share‚ what is the company’s cost of equity? 2.) The Ball Corporation’s common stock has a beta of 1.15. If the risk free rate is 5% and the expected return on the market is 12%‚ what is Ball Corp.’s cost of equity capital?
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What is cost of capital? The cost of capital is the cost of obtaining funds‚ through debt or equity‚ in order to finance an investment. It is used to evaluate new projects of a company‚ as it is the minimum return that investors expect for providing capital to the company‚ thus setting a benchmark that a new project has to meet. Importance The concept of cost of capital is a major standard for comparison used in finance decisions. Acceptance or rejection of an investment project depends on the
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managerial accounting concepts in the banking industry. Viewing managerial accounting from the perspective of the banking industry provides a unique opportunity to explore the development of the internal reporting structure. While the use of internal cost and profitabiHty reports is widespread in merchandising‚ manufacturing‚ and other service industries‚ banks have historically focused only on overall profitability. The reason is simple. In the past‚ interest rates‚ branch locations‚ and service offerings
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CRIPPLING COST Every spring high school students across the country celebrate over recently received acceptance letters to college. The thought of attending a top American institution is thrilling for young scholars‚ and with a letter of admission the dream is almost a reality. Parents are often less enthused since they know college in this country is far from cheap. For many families the cost of higher education is a large hurdle on the road to success. Over the last 30 years the cost of private
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How do the economic benefits of college compare to the costs? Under what circumstances-if any-is college worth it? I think that it depends on what you would like to do‚ whether a college degree is really worth it. I know for my future career goal of becoming a nurse‚ it is definitely necessary. But‚ if you chose to be a restaurant manager or become a police officer/fire fighter a college degree may not be the most cost effective path to becoming successful. When I went to college‚ I thought that
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shelter. Gratification is immediate in my life due to the availability of energy. Public health has created an environment of well being among the general public based on these amenities. However‚ a thought that rarely crossed my mind is what is the cost of my gratification. The realization that my need for comfort is slowly destroying the magnificent planet I live on was shaming‚ shocking‚ and terrifying. The instinct to reject this idea is immediate in myself and‚ I suspect‚ the entire population
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Section B Attempt Any Six Questions (6*5= 30) 1. Company A’s costs are mostly variable‚ whereas Company B’s costs are mostly fixed. When sales increase‚ which company will tend to realize the greatest increase in profits? Explain. 2. Crystal Telecom has budgeted the sales of its innovative mobile phone over the next four months as follows: Sales in Units July. . . . . . . . . . . . . . 30‚000 August . . . . . . . . . . . 45‚000 September . . . . . . . . 60‚000 October . . . .
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determine if the company is actually making money with their customers. With future growth imminent due to the success of their products‚ it was important that effort was taken to ensure that variable selling‚ general‚ and administrative (SG & A) costs did not increase faster than sales revenue. As Kanthal expanded operations and increased their market share‚ they captured business by meeting their customers ’ expectations for increased service. Increased demands were placed on their production and
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3/13/01 9:40 M Page 9 PART I Purpose of Cost Accounting 9 CH01_Bragg_36794 3/13/01 9:40 M Page 10 CH01_Bragg_36794 3/13/01 9:40 M Page 11 CHAPTER 1 Role of Cost Accounting When properly implemented‚ the cost accounting function can have a pervasive influence in the modern corporation. Unfortunately‚ it is not always properly implemented because management often is not completely aware of all the uses to which the cost accounting function can be put. This chapter describes
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Cost Cutting Tips Most of us spend more than we need to for a lot of things. If you really can afford luxuries such as gourmet teas or designer clothing and still save for your future‚ you’re lucky. However‚ if you’re struggling to meet the financial goals you’ve set on your retirement roadmap‚ it’s time to look for ways to cut expenses—daily‚ monthly‚ and long-term. Start by seeing if you’d benefit from either of these big cost-cutting strategies: •If you’re paying high interest on a mortgage
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