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Sonbull [250]
3 years ago
8

The Window Store will have a value of $139,000 if the economy does well this coming year and a value of $121,000 if the economy

does poorly. The probability of a good economy is 68 percent. The firm owes its bondholders $63,000. The firm will only operate for one more year. What is the value of this firm to its shareholders?
Business
1 answer:
ycow [4]3 years ago
8 0

Answer:

The value of this firm to shareholders is $70240

Explanation:

Using expected value approach, the value of the firm can be computed as :

(Optimistic value*its probability)+(pessimistic value*its probability)

optimistic value=$139000 and its probability is 68%=0.68

Pessimistic value=$121000 and its probability is 1-0.68=0.32

Expected value=($139000*0.68)+($121000*0.32)

                         =$133240

However, the value to shareholders is the expected value of the firm less debt of $63000

Equity value=$133240-$63000

                      =$70240

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Practice Question 25 Which one of the following is an effective method of evaluating a cost center? Compare actual total costs w
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C). Compare actual controllable costs with flexible budget data.

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A movie star was paid $1 million in 1960 to do a movie. The CPI was 29.3 in 1960 and the CPI in 2014 was 240. Approximately how
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$8.19 million

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3 years ago
Complete the statements and then calculate the change in consumption. The consumption function shows the relationship between co
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Answer:

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The consumption function shows the relationship between consumption spending and disposible income.

The slope of the consumption function is the marginal propensity to consume.

Changes in consumption can be predicted by multiplying the change in disposible income by the marginal propensity to consume.

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Therefore, The consumption will increase by  $800.

7 0
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