Answer:
c. It should process further because the reduction in the cost of the trees is irrelevant.
Explanation:
For the purpose of this Decision,
Benefit of processing further = Sales Value after processing – Sale Value before processing – Further Processing costs
Cost of acquiring trees is a sunk cost already incurred and hence is not relevant
Hence, benefit of processing = (0.80-0.20)*350 – 50
= $160
Hence, the answer is
c. It should process further because the reduction in the cost of the trees is irrelevant.
Answer:
RE break point = $24500
Explanation:
21,000 net income
30% OF Earnings as dividends
21,000 x 30% = 6,300 dividends
Retained Earnings (assuming no previous beginning value)
21,000 - 6,300 = 14,700
RE break point = 14,700/0.6 = 24500
What does the $24,500 mean?
This mean that the company can raise financing for this ammount without changing their capital structure (60% equity 40% debt)
If the company wants to finance for more, it will need to raise new shares or chance their capital structure, and therefore the WACC will change
Answer:
Option C because it is impossible to determine the legality based on the facts given.
Explanation:
Answer: $150,000,000
Explanation:
Question is:
What were the total proceeds from the common stock sale?
Total proceeds refer to the total amount that the sale of the stock generated. This means that you should not account for the underwriting fees as of yet but just the amount that came in.
= Number of shares sold * price per share
= 3,000,000 * 30
= $150,000,000
Answer:
To hedge the preferred stock position, the manager should: Buy tyx calls
Explanation:
When market interest rate rise preferred stock drop. To hedge using interest rate index option, <em>the contract must offer an offsetting profit during a period of rising interest rates. Therefore buy TYX calls. </em>These will continue to give ever increasing profit as market interest rate continue to rise. And it will offset the ever increasing loss that would be incurred on the XYZ preferred stock position as the market interest rate continues rising.
The hedge is that Any loss on preferred stock position would be offset by corresponding gain on the long interest rate index call position.
