Transcribed Image Text: 35. ABC Company currently sells 40,000 units of product X each year. Each unit costs P168 to produce and sells for P200. Fixed costs are P600,000 per

Transcribed Image Text: 35. ABC Company currently sells 40,000 units of product X each year. Each unit
costs P168 to produce and sells for P200. Fixed costs are P600,000 per year. The
firm has annual interest expense of P120,000 preferred stock dividends of
P42,000 per year, and a 30% tax rate. The degree of TOTAL leverage for LDM
Company is [round off to 2 decimal places] Transcribed Image Text: 37. The earnings, dividends, and stock price of ABC, Inc. are expected to grow at
7 percent per year after this year. Its common stock sells for P23 per share, its
last dividend was P2.00 and will pay P2.14 at the end of the current year. It should
pay P2.50 flotation cost. If the firm’s beta is 1.75, the risk-free rate is 8 percent,
and the average return on the market is 12 percent, what will be the firm’s cost of
equity using the CAPM approach? [nearest %]

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