Answered

Welcome to Westonci.ca, your ultimate destination for finding answers to a wide range of questions from experts. Explore our Q&A platform to find reliable answers from a wide range of experts in different fields. Explore comprehensive solutions to your questions from a wide range of professionals on our user-friendly platform.

pearson motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. the yield to maturity on the company's outstanding bonds is 8%, and its tax rate is 40%. pearson's cfo estimates that the company's wacc is 11.50%. what is pearson's cost of common equity? do not round intermediate calculations. round your answer to two decimal places.

Sagot :

anshumanaryan799

Pearsons's cost of common equity is :- 0% Debt; 60% Common equity; rd = 9%; T = 40%; WACC = 13.40%; rs =?

WACC= wdrd(1 - T) + wcrs

0.1340 = 0.40(0.09)(1 - 0.4) + 0.60rs

0.1340 = 0.0216 + 0.60rs

0.1124 = 0.60rs

rs = 18.73%

Common equity is the number that every common shareholder has invested within a very company. Most importantly, this includes the worth of the common shares themselves. However, it additionally includes retained earnings and further paid-in capital. Under the new Basel IIIbanking agreement giant internationally active banks are getting to be needed to carry a minimum of 4.5% of their risk-adjusted assets in common equity. This regulation is to be absolutely effective as of one Jan 2019.

In the United States, the Federal Reserve has determined that all banks can get to adhere to the standard, with the most important banks needing to hold an additional buffer.

Learn more about  Common equity  here: https://brainly.com/question/25566972

#SPJ4

Thanks for stopping by. We strive to provide the best answers for all your questions. See you again soon. Thank you for choosing our platform. We're dedicated to providing the best answers for all your questions. Visit us again. Thank you for visiting Westonci.ca. Stay informed by coming back for more detailed answers.