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ValentinkaMS [17]
3 years ago
8

Suppose a firm expects it’s EBIT to be 105,000 per year forever. Assume the firm can borrow at 6.75% ad has a tax rate of 32%. I

f the firm has no debt and a cost of equity of 10.25%, what is the value of the firm? ($696,585) Now suppose the firm borrows $120,000 and uses the proceeds to repurchase shares. Now what is the value of the firm?
Business
1 answer:
kolbaska11 [484]3 years ago
8 0

Answer:

* If the firm has no debt, value of the firm = $696,585;

* If the firm borrows $120,000 and uses the proceeds to repurchase shares, value of the firm = $1,132,686.

Explanation:

* If the firm has no debt, value of the firm is calculated as: EBIT x ( 1- tax rate) / Cost of equity = 105,000 x ( 1- 32%) /10.25% = $696,585;

* If the firm borrows $120,000 and uses the proceeds to repurchase shares, value of the firm is calculated as below:

- New capital structure: Debt = 120,000; Equity = 696,585 - 120,000 = $576,585=> Debt + Equity = $696,585.

=> WACC= 10.25% x 576,585 / 696,585 + 6.75% x 120,000 * (1-32%) / 696,585 = 9.27%.

=> Value of the firm = EBIT / WACC = 105,000/9.27% = $1,132,686.

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Each machine must be run by one of 19 cross-trained workers who are each available 35 hours per week. The plant has 10 type 1 ma
Mrac [35]

Answer:

The Linear programming model is given as below

Profit Function: P=90X+120Y+150Z

Constraints:

2X+2Y+Z\leq 400

3X+4Y+6Z\leq 240

4X+6Y+5Z\leq 320

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\dfrac{3X+4Y+6Z}{40}\leq 6

\dfrac{4X+6Y+5Z}{40}\leq 8

\dfrac{2X+2Y+Z}{35}+\dfrac{3X+4Y+6Z}{35}+\dfrac{4X+6Y+5Z}{35}\leq 19

Explanation:

As the question is not complete, the complete question is found online and is attached herewith.

Let the number of product 1 to be produced is X, that of product 2 is Y and product 3 is Z

so  the maximizing function is the profit function which is given as

P=90X+120Y+150Z

Now as the number of hours in a week are 40 and there are a total of 10 type 1 machines so the total number of machine 1 hours are 40*10=400 hours

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2X+2Y+Z\leq 400

Now as the number of hours in a week are 40 and there are a total of 6 type 2 machines so the total number of machine 2 hours are 40*6=240 hours

As from the given table product 1 uses 3 machine hours of machine 2, product 2 uses 4 machine hours of machine 2 and product 3 uses 6 hour of machine 2 so

3X+4Y+6Z\leq 240

Now as the number of hours in a week are 40 and there are a total of 8 type 3 machines so the total number of machine 3 hours are 40*8=320 hours

As from the given table product 1 uses 4 machine hours of machine 3, product 2 uses 6 machine hours of machine 3 and product 3 uses 5 hour of machine 3 so

4X+6Y+5Z\leq 320

Now as the machine 1 is used as 2X+2Y+Z in a week and the week is of 40 hours so the number of machines to be used are given as

\dfrac{2X+2Y+Z}{40}\leq 10

Now as the machine 2 is used as 3X+4Y+6Z in a week and the week is of 40 hours so the number of machines to be used are given as

\dfrac{3X+4Y+6Z}{40}\leq 6

Now as the machine 3 is used as 4X+6Y+5Z in a week and the week is of 40 hours so the number of machines to be used are given as

\dfrac{4X+6Y+5Z}{40}\leq 8

Now the workers are available for 35 hours so the worker available at the machine 1 is given as

\dfrac{2X+2Y+Z}{35}

That of machine 2 is given as

\dfrac{3X+4Y+6Z}{35}

That of machine 3 is given as

\dfrac{4X+6Y+5Z}{35}

As the total number of workers is 19 so the constraint is given as

\dfrac{2X+2Y+Z}{35}+\dfrac{3X+4Y+6Z}{35}+\dfrac{4X+6Y+5Z}{35}\leq 19

So the Linear programming model is given as below

Profit Function: P=90X+120Y+150Z

Constraints:

2X+2Y+Z\leq 400

3X+4Y+6Z\leq 240

4X+6Y+5Z\leq 320

\dfrac{2X+2Y+Z}{40}\leq 10

\dfrac{3X+4Y+6Z}{40}\leq 6

\dfrac{4X+6Y+5Z}{40}\leq 8

\dfrac{2X+2Y+Z}{35}+\dfrac{3X+4Y+6Z}{35}+\dfrac{4X+6Y+5Z}{35}\leq 19

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Answer:

True

Explanation:

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Answer and Explanation:

The computation of the missing amount is as follows

As we know that

Total manufacturing costs is

= Direct materials cost + Direct labor cost + Factory overhead  cost

And,

Cost of goods manufactured is

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Based on this, the calculation is as follows

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1. $44,000               $62,200     $51,100        $157,300

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1. $157,300                           $122,000     $85,200      $194,100

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3. $311,000                            $465,000       $57,000     $719,000

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