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Alenkasestr [34]
3 years ago
11

Old Town Industries has three divisions. Division X has been in existence the longest and has the most stable sales. Division Y

has been in existence for five years and is slightly less risky than the overall firm. Division Z is the research and development side of the business. Given this, the firm should probably :a. require the highest rate of return from Division X since it hos been in existence the longest b. assign the highest cost of capital to Division Z because it is most likely the riskiest of the three divisions c. use the firm's WACC as the cost of capital for Division Z as it provides analysis for the entire firm.d. use the fim's WACC as the cost of capital for Divisions e. allocate captal funds evenly amongst the divisions to maintain the current capital structure of the firm A and B because they are part of the revenue-producing operations of the firm.
Business
1 answer:
Mekhanik [1.2K]3 years ago
7 0

Answer:

b. assign the highest cost of capital to Division Z because it is most likely the riskiest of the three division.

Explanation:

The Old Town Industries will assign highest cost of capital to Division Z because it is research and development side of business. The research will incur high cost to the company. Only the research cost which meets certain conditions it will be capitalized as development costs. This Division Z is riskiest and incurs a large amount of expense for planned search of new technologies.

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3 years ago
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Suppose you purchased 500 shares of Jet-Electro Corporation stock at a price of $22.50 per share. One year later, the shares are
viva [34]

Answer:

C) 0.0 percent

Explanation:

The net return on any investment is what we receive from the investment in addition to the purchase price paid.

In the given instance the investor pays $22.50 per share as an investment cost, to acquire such shares. Number of shares purchased = 500

Now at the end of the period the shares are sold for $21 each

Also the dividend per share received is $1.50

Thus, total return = $21 + $1.50 = $22.50 per share.

This is exact same as that of the investment price.

Thus net return = Total benefits - Cost = $22.50 - $22.50 = $0

Since net return is $0 the value of return in percentage shall also be $0.

6 0
3 years ago
1. Production in insurance refers to the policies they produce: * True or False?
frosja888 [35]

Answer:

false

Explanation:

8 0
2 years ago
An analyst following Barlow Energy has compiled the following information in preparation for additional analysis she has to incl
Vadim26 [7]

Answer:

FCFE: 99

Explanation:

FCFE: cash flow from operation - CAPEX + borrowing

we calcualte the cash flwo form operation using the indirect method:

net income - preferred dividends = available for common stock

income = 125  + 14 = 139

net income                                       139

depreciation expense                      50

change in working capital               (30)

          cash flow from operation: 159

CAPEX will be the long term assets investment

investment on fixed capital<u> 100 </u>

                          CAPEX       100

net borrowing                        40

159 -100 + 40 = 99

3 0
3 years ago
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $ 15 comma 000 comma 000 bond​ issuanc
Alja [10]

Answer:

Amount allocated = $620,000

Explanation:

As per the data given in the question,

Bond issuance = $15,000,000

Electric mixer division used = $9,300,000

Electric lamp division used = $5,700,000

Interest cost on the bond = $1,000,000

Electric mixer division = Electric mixer division used ÷ Bond issuance

= $9,300,000 ÷ $15,000,000

=0.62

So, Allocated interest expense = Interest cost on the bond × Electric mixer division

= $1,000,000 × 0.62

= $620,000

3 0
3 years ago
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