All categories

3 years ago

What is your reaction to Harriet's suggestion of using the cost of debt only?

Business

1 answer:

Ahat [919]3 years ago

8 0

Answer:

No, it is a bad idea to use only the cost of debt

Explanation:

Only using the cost of debt, is not a good idea because too much amount of borrowing could lose the confidence of the investors and it could lead to the uncertainty in the future cash flows.

Suppliers might be worried regarding the financial situation and lead to the supply disruption. Though, the debt might save the tax expenses, which could lead to the negative cash flow.

When the company does not have adequate amount of cash at hand, it could cause many disruptions of financial. WACC (Weighted Average Cost of Capital) rates need to be used as the capital costs as it weigh the used capital cost and the used debt.

You might be interested in

A director violates the corporate opportunity doctrine if he or she competes with the corporation, unless the disinterested dire

DIA [1.3K]

The given statement " A director violates the corporate opportunity doctrine if he or she competes with the corporation, unless the disinterested directors approve of the director's actions " is TRUE

Explanation:

A business opportunity applies to any business opportunity that a client may gain.

The Corporate Opportunity law controls the moral responsibility of directors, managers and managing stockholders in an organisation, with loyalty responsibilities, not to misuse such incentives without first offering to the corporate board the right to reject the opportunity on behalf of the company.

When these actions are broken and a director of the company takes the chance, then the trustee has abused his obligation to be trustworthy and will be able to maintain a constructive trust with the proceeds arising from the incorrect transaction.

8 0

3 years ago

NEED ANSWER ASAP

myrzilka [38]

Answer:

i dont know if it is right but i think it is D

Explanation:

6 0

3 years ago

Kubin Company’s relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average cos

zvonat [6]

Answer:

total product costs incurred to make 27,500 units = $25.10 x 27,500 = $690,250
total period costs incurred to make 27,500 units = $15.10 x 27,500 = $415,250
total product costs incurred to make 31,000 units = $25.10 x 31,000 = $778,100
total period costs incurred to make 24,000 units = $15.10 x 24,000 = $362,400

Explanation:

Average Cost per Unit

Direct materials $8.90
Direct labor $5.90
Variable manufacturing overhead $3.40
Fixed manufacturing overhead $6.90
Fixed selling expense $5.40
Fixed administrative expense $4.40
Sales commissions $2.90
Variable administrative expense $2.40

Product costs include direct labor, direct materials, production supplies, and factory overhead. Product costs per unit = $8.90 + $5.90 + $3.40 + $6.90 = $25.10

Period costs include selling and administrative expenses. Period costs per unit = $5.40 + $4.40 + $2.90 + $2.40 = $15.10

4 0

3 years ago

In the video game console industry, Magnitude was the first firm to introduce a console in the market. However, consumers were u

Vanyuwa [196]

Answer:

B. early followers

Explanation:

Based on the information provided within the question it can be said that in this scenario Mantel and Adventura would be considered early followers. Early Followers or better known as First Followers, refers to the company or companies that enter the market shortly after the first company has already entered into that market. They do this to see the barriers that the first company has already overcome and are able to do it easier.

7 0

3 years ago

Cordell Inc. experienced the following events in Year 1, its first year of operation: Received $59,000 cash from the issue of co

faltersainse [42]

Answer:

a & c. See part a & c of the attached excel file for the table. In the attached excel file, Total revenue = $100,000; and Total expenses = $61,900.

b. The amount of net income reported on the 2018 income statement is $38,100.

d. The amount of cash flow from operating activities reported on the 2018 statement of cash flows is $25,000.

e. Before closing balance in service revenue account = $100,000; and After closing balance = $0.

f. The balance of the retained earnings account that appears on the 2018 balance sheet is $32,200.

Explanation:

a. & c. Identify the events that result in revenue or expense recognition and those which affect the statement of cash flows. In the Statement of Cash Flows column, use OA to designate operating activity, FA for financing activity, IA for investing activity and NA to indicate the element is not affected by the event.

Note: See part a & c of the attached excel file for the table.

From the attached excel file, we have:

Total revenue = $100,000

Total expenses = $61,900

b. Based on your response to Requirement a, determine the amount of net income reported on the 2018 income statement.

Based on part a & c above, we can determine this as follows:

Net income = Total revenue - Total expenses = $100,000 - $61,900 = $38,100

Therefore, the amount of net income reported on the 2018 income statement is $38,100.

d. Based on your response to Requirement c, determine the amount of cash flow from operating activities reported on the 2018 statement of cash flows.

Note: See part d of the attached excel file for the amount of cash flow from operating activities.

From the attached excel file, we have:

Cash flow from operating activity = $25,000

Therefore, the amount of cash flow from operating activities reported on the 2018 statement of cash flows is $25,000.

e. What is the before- and after-closing balance in the service revenue account?

Before closing balance in service revenue account = Services performed on account + Services performed for cash = $81,000 + $19,000 = $100,000

After closing balance = $0

The "after closing balance" is equal to zero because, at the end of a particular period, the balance of the service revenue account turns to $0 when the firm has to close the balance of the service revenue account in the retained earnings.

f. What is the balance of the retained earnings account that appears on the 2018 balance sheet?

Retained earnings = Net income - Cash dividend paid to the stockholders = $38,100 - $5,900 = $32,200

Therefore, the balance of the retained earnings account that appears on the 2018 balance sheet is $32,200.

Download xlsx

6 0

3 years ago