Operating cash flows . Sales . Phillips Equipment has 75,000 bonds outstanding that are selling at par . Bonds with similar characteristics are yielding 7.5 percent . The company also has 750,000 shares of 6 percent preferred stock and 2.5 million shares of common stock outstanding . The preferred stock sells for $ 64 a share . The common stock has a beta of 1.21 and sells for $ 44 a share . The U . S . Treasury bill is yielding 2.3 percent and the return on the market is 11.2 percent . The corporate tax rate is 34 percent . What is the firm ’ s weighted average cost of capital ? 11.56 percent 11.30 percent 11.18 percent 10.64 percent 9.69 percent Andy deposited $ 3,000 this morning into an account that pays 5 percent interest , compounded annually . Barb also deposited $ 3,000 this morning into an account that pays 5 percent interest , compounded annually . Andy will withdraw his interest earnings and spend it as soon as possible . Barb will reinvest her interest earnings into her account . Given this , which one of the following statements is true ? Barb will earn more interest the second year than Andy . Barb will earn more interest the first year than Andy will . Andy will earn compound interest . Andy will earn more interest in year three than Barb will . After five years , Andy and Barb will both have earned the same amount of interest . When utilizing the percentage of sales approach , managers :
1 . Estimate company sales based on a desired level of net income and the current profit margin .
2 . Consider only those assets that vary directly with sales .
III . Consider the current production capacity level . 1 . Can project both net income and net cash flows .
III and IV only