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2 years ago

The mm theory with taxes implies that firms should issue maximum debt. In practice, this does not occur because?

1 answer:

7 0

The MM Theory with taxes implies that firms should issue maximum debt. In practice, this is not true because Bankruptcy is a disadvantage to debt.

The Modigliani-Miller theorem states that a firm's capital structure does not affect its value. The theorem states that market value is determined by the present value of future earnings. This theorem has been influential since it was introduced in the 1950s.

Full market investors can borrow for the same cost as they lend and invest rationally. It is also implied that the process has no transaction costs.

The mm theorem states that a company's capital structure is not a factor in its value. The theorem states that market value is determined by the present value of future earnings. This theorem has been influential since it was introduced in the 1950s.

Learn more about MM Theory here

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Value is the perception by consumers that a band provides satisfaction greater than the cost incurred to acquire the product or

gtnhenbr [62]

Answer:

The correct answer is True.

Explanation:

The answer is not very simple to give; However, some experts in the field say that most people base their purchase decisions on "their perceptions about the value that different products or services provide"; which, overcomes the barrier of the lowest price or higher quality.

For this reason, today it has been widely reported that successful companies do not deliver products in exchange for a profit, but rather: Value in exchange for a profit.

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4 years ago

Question # 5

Zinaida [17]

Answer:

Growing the country's economy
Aiding in the creation of capital formation
Managing and mitigating the risks

Explanation:

The Financial system is very important because it helps grow the economy of the country. They do this by creating capital when they transfer funds from those who have it (savers) to those who need it (borrowers). These borrowers will then use it to invest in projects that will grow the economy.

The Financial system also works to manage and mitigate risk because they have experience in such areas and are able to discern which projects to go after to avoid or properly manage risk.

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3 years ago

On January 1, 2016, Big Hero invested $300,000 to start Hero Corporation. During the year, Hero Corporation had total revenues o

TiliK225 [7]

Answer:

B. $332,000

Explanation:

The computation of the total assets is shown below:

= Invested amount + total revenues - total expenses - cash dividends paid

= $300,000 + $60,000 - $16,000 - $12,000

= $300,000 + $60,000 - $28,000

= $300,000 + $32,000

= $332,000

Invested amount reflect the capital and the total revenues minus total expenses minus cash dividend reflects the retained earnings

4 0

3 years ago

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The comp

uysha [10]

Answer:

1. 6,000

2. 7,200

Explanation:

1. Calculation to determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.

Using this formula

Ending inventory=Fixed manufacturing overhead/Units produced*Ending units

Let plug in the formula

Ending inventory=62,000/310*30

Ending inventory=6,000

Therefore how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period is 6,000

2. Preparation of an income statement for the year using variable costing.

IDA SIDHA KARYA Company Variable Costing Income Statement

Units produced cost (130+350+50=530)

Sales $254,800

(280*910)

VARIABLE EXPENSES:

Variable cost of goods sold $148,400

(280*530)

Variable selling and administrative expense $11,200

(280*40)

Contribution margin $95,200

($254,800-$148,400-$11,200)

FIXED EXPENSES:

Fixed manufacturing overhead $62,000

Fixed selling and administrative expense $26,000

Net operating income $7,200

($95,200-$62,000-$26,000)

Therefore the income statement for the year using variable costing is $7,200

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3 years ago

You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving th

vovangra [49]

Answer:

Option 1 PV lumpsum = $200000

Option2 PV of Annuity = $195413.08035 rounded off to $195413.08

Based on the present value of both the options, Option 1 should be chosen as it has a higher present value than option 2.

Explanation:

To decide on the best option to choose among the given two, we need to find the present value of both the options.

As the first option is to receive a lumpsum payment of $200000 today, the present value of this option is also equal to $200000 as it will be received today.

Option two, on the other hand, is an annuity as fixed payments will be received after equal intervals of time and for a limited time period and at the end of the period which satisfies the criteria of annuity ordinary. We will use the formula for the present value of annuity which is,

PV of Annuity = C * [( 1 - (1+r)^-n) / r]

Where,

C is the periodic payment
r is the rate of return of discount rate
n is the number of periods

The periodic payment is provided as $1400. We are also provided with and APR of 6% which is the Annual rate. We will have to convert it into monthly rate by dividing it by 12. We are also provided with the number of years which we will need to convert into number of months by multiplying it by 12.

Monthly r = 6%/12 = 0.5%

Number of periods = 20 * 12 = 240

PV of Annuity = 1400 * [( 1 - (1+0.5%)^-240) / 0.5%]

PV of Annuity = $195413.08035 rounded off to $195413.08

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3 years ago