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The stockholders’ equity section of Leyland Corporation’s balance sheet at December 31 is presented here.

LEYLAND CORPORATIONBalance Sheet (partial)\begin{array}{c} \textbf{LEYLAND CORPORATION}\\ \textbf{Balance Sheet (partial)}\\ \end{array}

Stockholders’ equityPaid-in capitalPreferred stock, cumulative, 10,000 shares authorized,6,000 shares issued and outstanding$600,000Common stock, no par, 750,000 shares authorized,580,000 shares issued2,900,000Total paid-in capital3,500,000Retained earnings1,158,000Total paid-in capital and retained earnings4,658,000Less: Treasury stock (6,000 common shares)32,000Total stockholders’ equity$4,626,000\begin{array}{lrr} \text{Stockholders’ equity}\\ \qquad\text{Paid-in capital}\\ \qquad\qquad\text{Preferred stock, cumulative, 10,000 shares authorized,}\\ \qquad\qquad\qquad\text{6,000 shares issued and outstanding}&\text{\$\hspace{7pt}600,000}\\ \qquad\qquad\text{Common stock, no par, 750,000 shares authorized,}\\ \qquad\qquad\qquad\text{580,000 shares issued}&\underline{\text{\hspace{6pt}2,900,000}}\\ \qquad\qquad\qquad\text{Total paid-in capital}&\text{\hspace{1pt}3,500,000}\\ \qquad\text{Retained earnings}&\underline{\text{\hspace{6pt}1,158,000}}\\ \qquad\text{Total paid-in capital and retained earnings}&\text{\hspace{1pt}4,658,000}\\ \qquad\text{Less: Treasury stock (6,000 common shares)}&\underline{\text{\hspace{19pt}32,000}}\\ \text{Total stockholders’ equity}&\underline{\underline{\text{\$\hspace{1pt}4,626,000}}}\\ \end{array}


From a review of the stockholders’ equity section, answer the following questions.

(b) Assuming there is a stated value, what is the stated value of the common stock?


When calculating the weighted average cost of capital, the costs of which of the following types of capital include a (1T1 - T) multiplier, where TT is the effective tax rate?

a. Debt capital

b. Equity capital

c. Both (a) and (b)

d. Neither (a) nor (b)


Answered 1 year ago
Answered 1 year ago
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The weighted average cost of capital (WACC)(WACC) has a formula WACC=(E/V)ie+(D/V)id(1itr)WACC=(E/V)i_e+(D/V)i_d(1-itr) where EE is the firm’s total equity, DD is the firm’s total debt and leases, VV is the firm’s total invested capital, iei_e is the cost of equity or expected rate of return on equity, idi_d is the cost of debt or expected rate of return on borrowing and itritr is the corporate tax rate.

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