Baltimore Company uses a job order cost system and applies overhead based on estimated rates. The overhead application rate is based on total estimated overhead costs of $280,000 and direct labor hours of 25,000. During the month of February 2019, Job 2-1 incurred direct labor of 450 hours. Use this information to prepare the end of the month application General Journal entry (without explanation) of factory overhead for Job 2-1 for the month. If no entry is required then write "No Entry Required."

Answer:

As the standard deviation increases from $1000 to $3000, this will cause the confidence interval to go more wider.

Explanation:

Confidence interval is a tool used by many statisticians to take out the estimate amount of uncertainty which is associated when a sample estimate is taken out of a population parameter.

Standard deviation is a tool which is used to measure the amount of variations and when this standard deviation increases this means that the amount variations also increases and thus the confidence interval will go more wider as standard deviation shifts from $1000 to $4000 as given in this case.

The activity-based overhead rates for Fine Industries are:

Cutting: $36 per labor hour

Stitching: $25 per machine hour

Inspections: $17.50 per labor hour

Packing: $12.50 per finished goods unit

Based on the information provided, we can calculate the activity-based overhead rates for Fine Industries' four activity cost pools:

1. Cutting:

Cost pool total: $900,000

Cost driver: Labor hours

Estimated use of cost driver: 25,000 labor hours

Overhead rate: $900,000 / 25,000 labor hours = $36 per labor hour

2. Stitching:

Cost pool total: $8,000,000

Cost driver: Machine hours

Estimated use of cost driver: 320,000 machine hours

Overhead rate: $8,000,000 / 320,000 machine hours = $25 per machine hour

3. Inspections:

Cost pool total: $2,800,000

Cost driver: Labor hours

Estimated use of cost driver: 160,000 labor hours

Overhead rate: $2,800,000 / 160,000 labor hours = $17.50 per labor hour

4. Packing:

Cost pool total: $800,000

Cost driver: Finished goods units

Estimated use of cost driver: 64,000 finished goods units

Overhead rate: $800,000 / 64,000 finished goods units = $12.50 per finished goods unit

Therefore, the activity-based overhead rates for Fine Industries are:

Cutting: $36 per labor hour

Stitching: $25 per machine hour

Inspections: $17.50 per labor hour

Packing: $12.50 per finished goods unit

Answer:

1. Total manufacturing overhead cost = $35,000

2. Total Direct Material cost = $22,500

3. Total manufacturing cost = $72,500

4. Total Variable Selling and Administrative Cost = $6,000

5. Total variable cost = $43,500

6. Total Fixed Cost = $47,000

7. Total contribution margin = $76,500

Explanation:

Provided Sales = $120,000

Direct labor Cost = $15,000 which = 30% of total conversion cost

Total conversion cost = $15,000/30% = $50,000

Conversion cost = Labor cost + Manufacturing cost, manufacturing cost = $50,000 - $15,000 = $35,000

Provided Direct labor cost is 40% of total prime cost.

Total prime cost = Direct material + direct labor = $15,000/40% = $37,500

Direct material = $37,500 - $15,000 = $22,500

Provided selling and distribution expense = $18,000

Variable = Sales commission of 5% on sales = $120,000 X 5% = $6,000

Fixed Selling expenses = $18,000 - variable $6,000 = $12,000

Manufacturing Overhead cost is completely fixed = $35,000

Now we have total manufacturing cost = material + labor + manufacturing overheads = $22,500 + $15,000 + $35,000 = $72,500

Total variable cost = Material + labor + Selling & Administration

= $22,500 + $15,000 + $6,000 = $43,500

Total fixed cost = Manufacturing + Selling & Administrative

= $35,000 + $12,000 = $47,000

Total contribution margin = Selling Value - Total Variable Cost = $120,000 - $43,500 = $76,500

Final Answer

1. Total manufacturing overhead cost = $35,000

2. Total Direct Material cost = $22,500

3. Total manufacturing cost = $72,500

4. Total Variable Selling and Administrative Cost = $6,000

5. Total variable cost = $43,500

6. Total Fixed Cost = $47,000

7. Total contribution margin = $76,500

Answer:

The correct answer is option c.

Explanation:

As a result of immigration the population will increase. This will further cause the supply of labor to increase. The increase in supply of labor will further lead to a rightward in the labor supply curve. Consequently, wage rate will fall.

The demand for labor will not be affected by influx of workers.

So, option c is the correct answer.

Answer:

The investor valuation of a stock is $18.33

Explanation:

Gordon Growth model : The formula to compute investor valuation of stock is shown below:

= Dividend of year 1 ÷ (Required rate - growth rate)

where,

year 1 dividend = year 0 dividend × (1 + growth rate)

                         = $1 × (1 + 0.10)

                          =$1.10

Required rate of return = 16%

And, growth rate = 10%

Now apply the above formula which is equals to

= $1.10 ÷ (16% - 10%)

= $18.33

Hence, The investor valuation of a stock is $18.33

Final answer:

Using the Gordon growth model and given a last dividend of $1.00 with a 10% growth rate and a 16% required return, an investor would value the stock at $18.33.

Explanation:

According to the Gordon growth model (also known as the Dividend Discount Model), the value of a stock is calculated by dividing the next year's expected dividend by the difference between the investor's required rate of return and the dividend growth rate. In this case, since the last dividend was $1.00 and the dividends are expected to grow at a constant rate of 10 percent, the next expected dividend will be $1.00 multiplied by (1 + 10%), which equals $1.10. Given an investor's required return of 16 percent, the formula for the stock valuation would be:

Stock Value = Next Year's Dividend / (Required Return - Dividend Growth Rate) = $1.10 / (0.16 - 0.10) = $1.10 / 0.06 = $18.33.

Therefore, based on the Gordon growth model, an investor would value the stock at $18.33.

Answer:

Dep expense 428,796

    Acc Depp Machine 23,268

    Acc dep deposit 405,528

Explanation:

213,5000 machine used in the ore deposit, so it will depreciate at the same rate.

3,721,000 ore deposit

166,200/1,525,000 = 0.108983606

213,500 x 0.108983606 = 23,268

3,721,000 x 0.108983606 = 405,528

Answer:

The correct answer would be Brand Alignment.

Explanation:

In simple words, Brand alignment is the alignment of your company's employees behaviors, sales promotions, product development, sales and marketing efforts, etc, with the goal of the company. In this example, The slogan of Natural Care Products is 'Loving the Earth', which means the goal of the company is to actually love the earth by making efforts for it to clean it and make it pollution free and to do everything which makes the earth live longer. In this regard, the Natural Care Products Company not only hires enthusiastic employees who are inclined towards saving the earth, but also creates their products from all natural sources, plus arrange many opportunities for the employees to sign up for recycling activities. Their all such activities come under the Brand Alignment.

Answer:

The company will earn a gain of $14,000.

Explanation:

The original cost of the ells company's delivery truck was $ 56,000 and the accumulated depreciation account had a balance of $38,000, which means a provision for the $38,000 was made in case something bad happens to the truck, and it eventually did as the truck was destroyed by fire and hence the amount of $18,000 ($56,000 - $38,000) was left which was not covered by the company.

The company received $32,000 as insurance , which means the $18,000 loss would be covered here - $32,000 -$18,000 = $14,000, and also the company will gain $14,000.

Answer: Since Net Present Value is negative i.e. -4724.

[tex]\therefore[/tex] Fox will not accept the project.

Explanation:

Net Present Value = Initial after- tax outlay + Cash inflows[tex]\times[/tex]PVIFA(11.25%,5)

= -170000 + 45000[tex]\times[/tex]PVIFA(11.25%,5)

= -170000 +45000[tex]\times[/tex]3.6728

= - 4724

Since Net Present Value is negative i.e. -4724.

[tex]\therefore[/tex] Fox will not accept the project.

Answer: Spontaneous debt financing plus bank loans plus owners investment plus retained earnings.

Explanation: It is the general rule in accounting that assets of any business entity will always be equal to the capital invested from different sources and the liabilities taken over by the business for funds. Debt, owners equity and retained earnings are a source of capital  whereas bank loans is a liability .

Answer:

As the company grows and prospers, it's total assets requirement will be equal to spontaneous debt financing plus bank loans plus owner's investment plus retained earnings.

Explanation:

The total asset requirement can be defined as the book value of a set of assets that are just adequate to meet a particular solvency test. The company's total asset requirement will include company's capital and liabilities. Here, the bank loans can be classified as liability. While the others are source of capital for the company.

Answer: Option (A) is correct.

Explanation:

Each of the buyer and seller are small when we are relating it with the whole market. so, there will be no power in the hands of a single decision maker and if a firm wants to change their prices then it will not have any influence on the market price. In a competitive market, there are large number of buyers and sellers, thus, one buyer or seller doesn't have any impact on the market price.

Answer: A

Explanation:

It's a competitive market

Using the concept of cross-price elasticity, one can infer that cannies are a substitute good for splishy splashies and that flopsicles and splishy splashies are complementary goods. Based on this, splishy splashies and flopsicles should be promoted together.

To determine which products are either substitutes or complements, we look at the provided cross-price elasticity data. Substitute goods have positive cross-price elasticities of demand. When the price of one good decreases, the quantity of the substitute good sold increases. This is demonstrated in the increase of cannies sales when the price of splishy splashies decreases. Thus, cannies could be a substitute for splishy splashies.

Complement goods, on the other hand, have negative cross-price elasticities. This means that when the price of one good decreases, the quantity sold of the complement good also decreases. In this case, when the price of splishy splashies decreases, the quantity of flopsicles sold decreases. Therefore, flopsicles and splishy splashies could be considered complementary goods.

Considering this, your firm should promote splishy splashies and flopsicles together, as consumers are likely to consume these two products together.

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Answer:

The method 1 will have a bigger forecast bias ( whose value is 5 ) than the method 2 ( whose value 0 ).

Explanation:

To know which method will have the bigger forecast bias , we will see the deviation of both methods from the actual forecast numbers and then by seeing which one is having a bigger deviation value , we can say which one is having bigger forecast bias.

FORECAST BIAS = ACTUAL NUMBER - FORECAST NUMBER

Actual           Forecast        Forecast        Forecast             Forecast

caller turn      method 1       method 2      bias method 1    bias method 2

23                    23                  20                  0                           3

10                     5                    13                   5                           -3

15                     14                   14                   1                             1

19                     20                  20                 -1                            -1

TOTAL                                                          5                             0

from the above information we can say that the method 1 with forecast bias value of 5 is much bigger than the method 2 with forecast bias value of 0.

Answer:

The principle of quality states that the experiences that engage us in the most critical components of an activity are most likely to increase our capacity to perform that activity. Critical components are the elements of an activity that are most important for performing it at a high level. To be really good at an activity, you must focus on what factor you need most and improve that area.The principle of quantity states that when all other factors are equal, increasing the frequency of our engagement with the critical components of an activity usually  

results in the largest performance improvement in that activity. Generally, the performer whose experiences have engaged her most often in the critical components of an activity usually becomes the most competent in that activity.A physical activity professional asked to create a plan to decrease the time in a marathoner’s performance would begin by conducting a analysis. The critical components in this activity relate to physical performance capacity more than skill.  

Explanation:

The principle of quality in physical activities refers to the importance of the type of activity, while the principle of quantity refers to the amount or volume of the activity. In designing physical activity experiences, professionals use these principles along with the understanding of physical principles and physical quantities.

The principle of quality refers to the concept that in physical activities, the type of physical activity (for instance, its intensity and level of difficulty) is important in achieving certain goals. For example, a physical education instructor refers to this principle when planning a circuit training activity that includes high-intensity exercises for students aiming to improve body strength and endurance.

On the other hand, the principle of quantity refers to the idea that the amount or volume of a physical activity (such as its duration, frequency, and repetition) is crucial in yielding desired outcomes. A professional trainer may apply this principle in designing a running program for a beginner where the distance covered gradually increases over time, helping the trainee improve stamina over a given period.

The application of these principles requires the understanding of physical principles and physical quantities. Understanding how to measure and compute physical quantities, and how physical principles work in different scenarios, allow fitness professionals to design more effective physical activity experiences.

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Answer:

The correct answer would be Differentiation Strategy.

Explanation:

There are three generic strategies of Porter. One is Cost Leadership, other is Differentiation and the last one is Focus.

Among these strategies, Differentiation is the strategy which is used by the bank in this question. Differentiation is a strategy used by the companies to make them unique in the industry through some dimensions which are highly valued by the customers or clients of that company. For Example in this question, the bank provides the facility of transferring money in an account by just snapping a shot of check and depositing it into that account. This feature make them unique in the banking sector. So this is called the differentiation strategy.  

Answer:

The correct answer is option A.

Explanation:

Substantive is a type of auditing procedure. It involves the process of examining financial statements and other related documents to  check for error.

These tests are conducted to ensure that the financial records are complete and correct.

These procedures are conducted by an auditor and include examining journal entering, testing account balances and transactions.

Though it does not include requesting a cut off bank statement to be mailed to the client.

Answer:

If the rate is 4%: 70/4 = 17.5 years - about 18 years

Explanation:

The rule of seventy allows you to determine how long the amount invested will double. For this, just divide 70 by the annual rate of return. The rule of seventy can be applied intuitively for the calculation of other growth rates, such as a country's GDP.

The calculation is simple, just divide 70 by the value of the growth rate.

If the rate is 4%: 70/4 = 17.5 years - about 18 years

If the rate is 5%: 70/5 = 14 years

If the rate is 6%: 70/6 = 11.6 years - about 12 years

Using the rule of 70, we can determine the number of years it will take for the economy to double at different growth rates.

To determine the number of years it will take for an economy to double at different growth rates, we can use the rule of 70. The rule of 70 states that the doubling time of a variable is approximately equal to 70 divided by the growth rate. Therefore, for a 4% growth rate, it will take approximately 17 years for the economy to double (70 / 4 = 17.5). For a 5% growth rate, it will take approximately 14 years (70 / 5 = 14). And for a 6% growth rate, it will take approximately 12 years (70 / 6 = 11.67).

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Answer:

Flexible Budget for May                    Value                          Percentage of sales

Sales Revenue 340 hours           450 X 340 = $153,000

Wages and salaries  $11,500 + ($124 X 340) = $53,660               35.07%

Supplies                                          $4 X 340  = $1,360                    0.88%

Equipment rental      $2,500 + ($23 X 340)   = $10,320                6.745%

Insurance                                          $3,800   =  $3,800                  2.48%

Miscellaneous              $510 + (1.46 X 340)    = $1,006.4                 0.657%

Total Expense                                                  = $70,146.4                45.85%                                        

Net Operating Income                                    = $82,853.6              54.153        

In a flexible budget all items are shown as a percentage of total revenue (Sales). Further the budget is adjusted based on sales level, where all variable expenses are proportionate to sales.

The flexible budget for Puget Sound Divers for May, considering 340 hours of actual diving activity, shows total revenue of $153,000, total expenses of $70,144, and a net operating income of $82,856.

The flexible budget is a budget that adjusts or flexes for changes in the volume of activity. With 340 hours of actual diving activity in May, the flexible budget changes. Let's break down the flexible budget calculation by each component:

Adding all these costs, the total expense is $70,144. Subtracting this from the revenue, the net operating income is $153,000 - $70,144 = $82,856.

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Answer: 16

Explanation: Average rate of change of C with respect to X is given as

= [tex]\frac{\Delta C}{\Delta X}[/tex]

= [tex]\frac{(C(102)-C(100))}{(X(102)-X(100))}[/tex]

= [tex]\frac{ 10132.2-10100}{102-100}[/tex]

= 32/2

= 16

Final answer:

The average rate of change of the cost function C(x) from x = 100 to x = 102 is $16.10.

Explanation:

The average rate of change of the cost function C(x) from x = 100 to x = 102 is the change in C divided by the change in x. We can calculate this by finding the values of C(102) and C(100) and then computing the difference between them.

To find C(102):
C(102) = [tex]9000 + 6(102) + 0.05(102)^2[/tex] = 9000 + 612 + 520.2 = 10132.2
To find C(100):
C(100) = [tex]9000 + 6(100) + 0.05(100)^2[/tex] = 9000 + 600 + 500 = 10100

Now, find the average rate of change:
Average rate of change = [tex]\frac{(C(102)-C(100))}{(102 - 100)}[/tex] = [tex]\frac{(10132.2 - 10100)}{2}[/tex] = [tex]\frac{32.2}{2}[/tex] = 16.1
Therefore, the average rate of change of C with respect to x when the production level is changed from x = 100 to x = 102 is $16.10.

Explanation:

First of all, the dealer should not have sold the car to the sixteen year old boy without the presence of his parents or any guardian. It is illegal to have a contract with a child who is not legally allowed to drive the car before the age of eighteen.

Now secondly if the dealer has somehow sold the car to the boy, the boy cannot come back after few months and ask for returning his money because he purchased the car, the condition of the condition of the car got worse during the whole time when car was with him, and also there is no legal clause in the agreement which allows him to demand his money back after using the car for this long time. So demanding his money back from the dealer is totally unethical as well as illegal. The dealer is true that the car is still the property of the boy and the money is still the dealer's money.

Answer: Step Four - Construct Segments Profile

Explanation:

When practical market segments have been resolved, segment profiles are then created. Segment profiles are point by point depictions of the purchasers in the segments – portraying their needs, behaviors, preferences for the goods, socio economics, shopping styles, etc. This is much similarly that the age accomplices of Baby Boomers, Generation X and Generation Y have a name.

The step in the STP process that involves developing descriptions of different customer segments is the Segmentation stage. Here, the market is divided into groups based on shared characteristics and needs, which are profiled to assist with tailored marketing approaches.

In the STP (Segmentation, Targeting, Positioning) process, the step that involves developing descriptions of the different segments to better understand customer profiles in each segment is the Segmentation stage. During Segmentation, the market is divided into distinct groups of customers based on shared characteristics, needs or behaviors that might require separate marketing strategies. Each segment is profiled in terms of demographics, psychographics, behavioral characteristics and customer needs. This allows firms to fully understand who their customers are, their needs and how best to approach them with tailored marketing strategies.

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Answer:

(1)

CS 34,500

Capital in excess of par 57,000

RE 118,500

Total equity  210,000

(2)

CS 34,500

Capital in excess of par 57,000

RE 111,600

Total equity  203,100

Explanation:

(1)

RE 31,500

  Common Stock 4,500

  Capital in excess of par 27,000

(2)

RE 6,900

   Dividends 6,900

34,500 shares outstanding x 0.2 per share = 6,900

Answer: Having lower opportunity costs.

Explanation: Opportunity cost can be defined as the cost of next best alternative foregone. In this case, James is saving his money by taking work of a professional from a new recruit also he gets the opportunity to procure high quality materials which he was earlier not able to. Thus, he is saving a major portion of income because of a less costly alternative available.

By utilizing the concept of cross-price elasticity, the data indicates that guppy gummies and flopsicles, due to their negative cross-price elasticity, are complementary goods and should be advertised together. Guppy gummies and mookies, having a positive cross-price elasticity, are substitutes and are not typically consumed together.

Based on the data provided, we can use the concept of cross-price elasticity to determine which products are complements and which are substitutes. Remember that substitute goods have positive cross-price elasticities: if the price of good A increases, the quantity consumed of good B also increases. On the other hand, complement goods have negative cross-price elasticities: if the price of good A increases, the quantity consumed of good B decreases.

In the case of guppy gummies and flopsicles, when the price of guppy gummies increases by 5%, the quantity of flopsicles sold decreases by 4%. This negative cross-price elasticity suggests that these goods are complements, meaning they are consumed together. Hence, it's a good idea to advertise these two products together.

Alternatively, when the price of guppy gummies increases by 5%, the quantity of mookies sold increases by 5%. This positive cross-price elasticity implies that guppy gummies and mookies are substitute goods, and they are not typically consumed together. Thus, it's not advisable to advertise these two products together.

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The merchandise inventory turnover for Feemster Company in 2012 was 8 times; this was calculated by dividing the cost of goods sold, which was $1,400,000, by the average inventory amount of $175,000.

To calculate the merchandise inventory turnover rate for Feemster Company in 2012, we need to use the formula:

Inventory Turnover = Cost of Goods Sold / Average Inventory

First, we find the average inventory for the year:

Average Inventory = (Beginning Inventory + End Inventory) / 2
Average Inventory = ($155,000 + $195,000) / 2
Average Inventory = $175,000

Then, we use the Cost of Goods Sold and Average Inventory to calculate the inventory turnover:

Inventory Turnover = $1,400,000 / $175,000
Inventory Turnover = 8 times

Thus, the inventory turned over 8 times during the year 2012.

Answer:

[tex]R{_s}[/tex] is the symbol of cost of raising capital from retained earnings.

Weight of common equity = c) 0.32

Explanation:

[tex]R{_s}[/tex]  is the symbol that represents the cost of raising capital through retained earnings in weighted average cost of capital.

Wyle Co.

Total of capital structure = Debt + Preferred Stock + Common Equity

= $3.9 million + $3 million + $3.3 million = $10.2 million

Weight on common equity = Equity/Capital structure

= [tex]\frac{3.3 million}{10.2million}[/tex] = 0.32

As weight is share of common equity out of total capital. It can be stated in percentage or decimal value.

[tex]R{_s}[/tex]

C) 0.32

Answer:

The weighted average cost of capital (WACC) formula calculates a company's cost of borrowing money, taking both debt and equity into consideration. Investors and analysts use the WACC to evaluate an investor's return on an investment (ROI) in a company.

Explanation:

Option C is the correct answer.

[tex]\text{GIVEN}:\\ \text{Debt} = 3.9 \text{ million}\\ \\\text{Preferred Stock} = 3 \text{ million}\\ \\\text{Common Equity} = 3.3 \text{ million} \\[/tex]

[tex]\\\text{Total value of capital structure}: \\ = 3.9 + 3 + 3.3\\ = 10.2\\\\\text{Weight of common equity}:\\= \text {Common equity / Total value of Capital structure}\\ \text{Weight of common equity} = 0.32[/tex]

Therefore, the weight on common equity will 0.32.

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Answer:

The answer is $300 gain.

Explanation:

Operations:

Answer:

2.1276%

Explanation:

[tex]\ $Real Rate$  =   \frac{1+nominal}{1+inflation}  - 1 [/tex]

1.056/1.034 -1 = 0,021276595744681  rounding to 4 decimal places:

2.1277%

The reasoning behind this formula is the following:

there is a rate that generate the combine effect of the nominal and the inflation rate

Principal (1+real rate)  = Principal x (1+nominal) / (1+ inflation)

removing the principal for clearence:

1+real rate =(1+nominal) x (1+ inflation)

real rate = (1+nominal) x (1+ inflation)  - 1

Final answer:

To calculate the real interest rate, subtract the inflation rate of 3.40% from the nominal interest rate of 5.60%. The resultant real interest rate is approximately 2.20% for the last year.

Explanation:

The question asks us to calculate the real interest rate given a nominal interest rate of 5.60% and an inflation rate of 3.40% over the last year. According to the Fisher equation, the real interest rate can be approximated by subtracting the inflation rate from the nominal interest rate. This formula does not require cross-product terms, so we use a simple arithmetic subtraction for this calculation.

To find the real interest rate, we follow this basic formula:

Start with the nominal interest rate: 5.60%

Subtract the inflation rate: 3.40%

The result is the real interest rate

Therefore, the calculation would be:

Real Interest Rate ≈ Nominal Interest Rate – Inflation Rate

Real Interest Rate ≈ 5.60% – 3.40% = 2.20%

Hence, the real rate of interest over the last year was approximately 2.20%.

Answer:

There are various material variances, but main are Material Price Variance and Direct Material Quantity Variance and with the combination of these 2 variances we have Material Usage Variance

Material Price Variance = (Standard Price - Actual Price) X Actual Quantity

Given standard Price = $5 per unit

Actual Price = $5 - 4% = $4.8

Material Price Variance  = ($5 - $4.8) X 16,500 = $3,300 Favorable

Material Quantity Variance = (Standard Quantity - Actual Quantity) X Standard Price

Standard Quantity = 4,000 units X 4 pounds per unit = 16,000 pounds

Material Quantity Variance = (16,000 - 16,500) X $5 = - $2,500 Unfavorable

Material Usage Variance = Standard Price X Standard Quantity - Actual Price X Actual Quantity

= ($5 X 16,000) - ($4.8 X 16,500)

= $80,000 - $79,200 = $800 Favorable = Material Price Variance + Material Quantity Variance = $3,300 + (-$2,500) = $800 Favorable

Material Price Variance = $3,300 Favorable

Material Quantity Variance = - $2,500 Unfavorable

Material Usage Variance = $800 Favorable

Answer:

The weighted average cost of capital should you use to evaluate potential projects is 9.87%

Explanation:

Weighted average cost of capital (WACC) : The WACC shows the total proportion towards debt and equity.

The debt should always be calculated after considering tax.

The computation of weight-age average cost of capital is shown below:

For debt = Yield to maturity × (1 - tax rate )

              = 11.11% × (1-0.40)

              = 6.67%

For equity it is given in the question i.e = 12%

As, the capital structure is give, 40% is for debt and 60% is for equity. After considering these capital structure, the computation can be made.

= Cost of equity × weighted of equity  + cost of debt × weight-age of debt

= 12% × 60% + 6.67% × 40%

= 7.2% + 2.67%

= 9.87%

Thus, the weighted average cost of capital should you use to evaluate potential projects is 9.87% .