Reference no: EM132572587

Question 1: Scout Corporation has income before taxes of $400,000 and a loss on discontinued operations of $100,000. If the income tax rate is 25% on all items, the statement of comprehensive income should show income from continuing operations and net income, respectively, of:

Option 1: $300,000 and $75,000.

Option 2: $325,000 and $75,000.

Option 3: $325,000 and $100,000.

Option 4: $300,000 and $100,000

Question 2: The capital structure of ABC Inc. is as follows: 30% Debt, 20% Preferred stock and 50% common equity. The bond yield to maturity is 11%; the cost of preferred stock is 10 %; and the cost of common equity (in the form of retained earnings) is 14 %. Assume that the corporate tax rate is 30%, what is the weighted average cost of capital for ABC.

Option 1: 12.41

Option 2: 11.31

Option 3: 9.89

Option 4: 10.52