Home Insert Page Layout Formulas Data Review View Key West Phoenix Carmel Total 2 Revenues 3 Variable costs 4 Fixed costs 5 Operating income 6 Interest costs on long-term debt at 8% 7 Income before taxes 8 Net income after 35% taxes $4,100,000 1,600,000 1,280,000 1,220,000 368,000 852,000 $4,380,000 1,630,000 1,560,000 $3,230,000 955,000 980,000 $11,710,000 4,185,000 3,820,000 3,705,000 1,224,000 2,481,000 1,190,000 416,000 1,295,000 440,000 855,000 774,000 553,800 503,100 555,750 1,612,650 10 Net book value at 2017 year-end: 11 Current assets 12 Long-tem assets 13 Total assets $ 850,000 5,462,000 6,312,000 $ 2,730,000 17,172,000 19,902,000 $1,280,000 4,875,000 6,155,000 $ 600,000 6,835,000 7,435,000 14 15 Current liabilities 16 Long-term debt 17 Stockholders' equity 18 Total liabilities and stockholders' equity 330,000 4,600,000 1,225,000 6,155,000 265,000 5,200,000 847,000 84,000 5,500,000 1,851,000 7,435,000 679,000 15,300,000 3,923,000 19,902,000 6,312,000 19 20 Market value of debt 21 Market value of equity 22 Cost of equity capital 23 Required rate of return 24 Accumulated depreciation on long-temm assets $15,300,000 7,650,000 14% 11% $2,200,000 $1,510,000 $ 220,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

. Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: 

Q.Refer back to the original data. Calculate the WACC for Refresh Resorts.

Home
Insert
Page Layout
Formulas
Data
Review
View
Key West
Phoenix
Carmel
Total
2 Revenues
3 Variable costs
4 Fixed costs
5 Operating income
6 Interest costs on long-term debt at 8%
7 Income before taxes
8 Net income after 35% taxes
$4,100,000
1,600,000
1,280,000
1,220,000
368,000
852,000
$4,380,000
1,630,000
1,560,000
$3,230,000
955,000
980,000
$11,710,000
4,185,000
3,820,000
3,705,000
1,224,000
2,481,000
1,190,000
416,000
1,295,000
440,000
855,000
774,000
553,800
503,100
555,750
1,612,650
10 Net book value at 2017 year-end:
11 Current assets
12 Long-tem assets
13 Total assets
$ 850,000
5,462,000
6,312,000
$ 2,730,000
17,172,000
19,902,000
$1,280,000
4,875,000
6,155,000
$ 600,000
6,835,000
7,435,000
14
15 Current liabilities
16 Long-term debt
17 Stockholders' equity
18 Total liabilities and stockholders' equity
330,000
4,600,000
1,225,000
6,155,000
265,000
5,200,000
847,000
84,000
5,500,000
1,851,000
7,435,000
679,000
15,300,000
3,923,000
19,902,000
6,312,000
19
20 Market value of debt
21 Market value of equity
22 Cost of equity capital
23 Required rate of return
24 Accumulated depreciation on long-temm assets
$15,300,000
7,650,000
14%
11%
$2,200,000
$1,510,000
$ 220,000
Transcribed Image Text:Home Insert Page Layout Formulas Data Review View Key West Phoenix Carmel Total 2 Revenues 3 Variable costs 4 Fixed costs 5 Operating income 6 Interest costs on long-term debt at 8% 7 Income before taxes 8 Net income after 35% taxes $4,100,000 1,600,000 1,280,000 1,220,000 368,000 852,000 $4,380,000 1,630,000 1,560,000 $3,230,000 955,000 980,000 $11,710,000 4,185,000 3,820,000 3,705,000 1,224,000 2,481,000 1,190,000 416,000 1,295,000 440,000 855,000 774,000 553,800 503,100 555,750 1,612,650 10 Net book value at 2017 year-end: 11 Current assets 12 Long-tem assets 13 Total assets $ 850,000 5,462,000 6,312,000 $ 2,730,000 17,172,000 19,902,000 $1,280,000 4,875,000 6,155,000 $ 600,000 6,835,000 7,435,000 14 15 Current liabilities 16 Long-term debt 17 Stockholders' equity 18 Total liabilities and stockholders' equity 330,000 4,600,000 1,225,000 6,155,000 265,000 5,200,000 847,000 84,000 5,500,000 1,851,000 7,435,000 679,000 15,300,000 3,923,000 19,902,000 6,312,000 19 20 Market value of debt 21 Market value of equity 22 Cost of equity capital 23 Required rate of return 24 Accumulated depreciation on long-temm assets $15,300,000 7,650,000 14% 11% $2,200,000 $1,510,000 $ 220,000
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 4 images

Blurred answer
Knowledge Booster
Economic Value Added
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education