Finance

Have Finance Questions? Ask a Financial Expert Online.

Ask an Expert,
Get an Answer ASAP!

Finance
This answer was rated:

# Shawhan Supply plans to maintain its optimal capital structure

of 30% debt, 20% preferred...
Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt-10%; preferred stock-11%; and common stock-16%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

a. 10%
b. 12%
c. 14%
d. 16%
Show More
Show Less
Answered in 2 hours by:
11/17/2009
Falak Naz, Accountant
Category: Finance
Satisfied Customers: 532
Experience: I am a qualified Chartered Accountant. Currently i am working in financial institution.
Verified

HiCustomer

We need to compute WACC to determine the required rate of return

= Cost of debt X weight of debt + cost of Preferred X weight + cost of equity X weight

= 10%(1-40%) X 30% + 11% X 20% +16% X 50%

= 1.8 + 2.2 + 8

= 12% Choice b

Falak Naz, Accountant
Category: Finance
Satisfied Customers: 532
Experience: I am a qualified Chartered Accountant. Currently i am working in financial institution.
Verified
Falak Naz and 87 other Finance Specialists are ready to help you
Ask Falak Naz Your Own Question
Falak Naz, Accountant
Category: Finance
Satisfied Customers: 532
532 Satisfied Customers
Experience: I am a qualified Chartered Accountant. Currently i am working in financial institution.

Falak Naz is online now

A new question is answered every 9 seconds

How JustAnswer works:

• Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
• Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
• 100% Satisfaction GuaranteeRate the answer you receive.

## JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

## What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

## Meet the Experts:

Rakhi Vasavada

Financial and Legal Consultant

2,608 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Certified Public Accountant (CPA)

2,218 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Tutor

1,919 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Attorney

332 satisfied customers

NASD Licensed Rep, 1997-2001, Business Attorney

< Previous | Next >

Related Finance Questions
Parent Co holds 80 percent of the common stock of Subsidiary
Parent Co holds 80 percent of the common stock of Subsidiary Co. In the current year, Parent reports sales of \$5,000,000 and cost of goods sold of \$3,500,000. For the same period, Subsidiary has sales… read more
Anita L. Eisthen, CFA, CPA, MBA
Owner and Chief Investment Officer
Master\u0027s Degree
83 satisfied customers
Corporate Liquidation - I have not done one is all of these
Corporate Liquidation - I have not done one is all of these years. I just need assurance on the simple set of facts. All assets sold in prior year, no liabilities exist and the current year has a smal… read more
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
If \$ are moved off shore, the income is still taxable to a
if \$ are moved off shore, the income is still taxable to a US taxpayer, but is it free of judjements from a Federal receiver? … read more
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I'm a soon to be divorced single mom, age 44, living on
Hello. I'm a soon to be divorced single mom, age 44, living on mostly alimony for the next 3 years. Can you help me understand how much I should be saving for retirement each month? I ill have about 3… read more
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I have a question about the value of one common stock. If I
Hi,I have a question about the value of one common stock. If I know the value of the total company, should I divide the value of the total company by the number of the ISSUED stocks or the number of t… read more
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
I work in life insurance policy analysis. We are a fairly
I work in life insurance policy analysis. We are a fairly new venture and are figuring out how we want to engage in reviewing variable policies. My greatest concern with them is the sub account alloca… read more
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I need to determine the value of the company in order to
Hi,I need to determine the value of the company in order to issue stock options for my employees. What will be the best method to use what is the formula?I own a small start up company which provides … read more
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
Do you know anything about oil pension checks? I need about
I need about 2K more income per month to keep nose above water. I have about 66K savings. what amount of investment woutd yield the 2K income? … read more
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
Why is it that in evaluating commercial properties, the cap
why is it that in evaluating commercial properties, the cap rate (rate of return) is inversely related to the present value? i'd think that the higher the rate of return, the more desirable the proper… read more
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
What is the journal entry to post the S Corp buyout of
what is the journal entry to post the S Corp buyout of shareholders … read more
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
I have question about how to book a journal entry. A
I have question about how to book a journal entry. A shareholder of my company company acquired 250 shares of stock in exchange for a promissory note for \$40,625. The note was signed 12/31/16. Assumin… read more
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
I set up an LLC with two other partners. We made the mistake
I set up an LLC with two other partners. We made the mistake of not filing as an S Corp. We then made the mistake of putting ourselves on payroll as we work in the business. What do we do now? We don'… read more
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a question about 5472 forms, Do I need to file 5472
Do I need to file 5472 forms if the total transaction amounts are below \$2000? … read more
taxmanrog
Master\u0027s Degree
698 satisfied customers
Bob has a friend who's willing to help him out and invest in
Bob has a friend who's willing to help him out and invest in a company that Bob will start. Bob is putting in sweat. He'd prefer that friend doesn't have rights, and has the lowest percentage s-alloca… read more
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
My question is a little complicated.. my company offered
My question is a little complicated.. my company offered incentive stock options which vest over a 4 year period.. they recently converted from an llc to a corporation and offered us options on our ve… read more
ABC Accounting Group
Bachelor\u0027s Degree
682 satisfied customers
We have a brand new startup that's been in operation for
We have a brand new startup that's been in operation for about a year. We are pre-revenue which means we have not really made any money yet. How do we calculate our fair market value when it comes to … read more
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I resigned from UBS financial services, as a series 7
I resigned from UBS financial services, as a series 7 registered financial advisor. I will stay in the industry, transitioning to either Wells fargo or morgan stanley or ***** *****.... Am I allowed t… read more
Rakhi Vasavada
Financial and Legal Consultant
Bachelor's Degree
2,608 satisfied customers
I own several preferred stocks issued by banks. They have
I own several preferred stocks issued by banks. They have dividends around 5%, and the price is very stable...around \$25. They are callable at \$25 several years from now. I was wondering why a financi… read more
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x