$74,500 Accrued taxes and expenses payable 25,500 Long-term debt 48,500 Common stock ($10 par) 155,000 Paid-in capital in excess of par 89,500 Retained earnings 213,000 Total equities $606,000 Net sales (all on credit) $801,000 Cost of goods sold 601,500 Net income 81,500 Please answers these subparts (g) Profit margin on sales % (h) Return on common stockholders’ equity %
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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The following information pertains to Sheridan Company:
| Cash | $21,500 | ||
| 125,000 | |||
| Inventory | 75,500 | ||
| Plant assets (net) | 384,000 | ||
| Total assets | $606,000 | ||
| Accounts payable | $74,500 | ||
| Accrued taxes and expenses payable | 25,500 | ||
| Long-term debt | 48,500 | ||
| Common stock ($10 par) | 155,000 | ||
| Paid-in capital in excess of par | 89,500 | ||
| 213,000 | |||
| Total equities | $606,000 | ||
| Net sales (all on credit) | $801,000 | ||
| Cost of goods sold | 601,500 |
|
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| Net income |
81,500 |
Please answers these subparts
(g) Profit margin on sales %
(h) Return on common
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