This scenario best illustrate Backward vertical integration
Explanation:
Backward integration is a vertical integration that extends the role of a organization to perform roles traditionally performed by firms in the supply chain.
In other terms, backward integration is where an enterprise imports another company providing the necessary goods or services for production.
For examples, an company might purchase the product or raw materials manufacturer. Businesses often complete retrograde incorporation of these other businesses or combine of them. However, they may set up their own divisions to perform this mission.
Answer: Cost-push inflation is caused by an increase in the prices of the underlying inputs of production.
Answer:
WACC is 9%
Explanation:
WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.
According to WACC formula
WACC = ( Cost of equity x Weightage of equity ) + ( Cost of debt ( 1- t) x Weightage of debt ) + ( Cost of Preferred equity x Weightage of Preferred equity )
As per given data
Market Values
Equity = $7 billion,
Preferred stock = $2 billion
Debt = $13 billion
Cost
Equity
Capital asset pricing model measure the expected return on an asset or investment. it is considered as the cost of common stock.
Formula for CAPM
Cost of Equity = Risk free rate + beta ( market return - risk free rate )
Cost of Equity = Rf + β ( Mrp )
Cost of Equity = 3% + 1.6 ( 8% ) = 15.8%
Preferred stock = $2 / $26 = 0.077 = 7.7%
Debt = 8%
Placing values in the formula
WACC = ( 15.8% x $7 billion / $22 billion ) + ( 8% ( 1- 0.3) x $13 billion / $22 billion ) + ( 7.7% x $2 billion / $22 billion )
WACC = 5.03% + 3.31% + 0.7% = 9.04%
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Answer:
$11,760
Explanation:
The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income/profit.
Without the new offer
Profit = 5000($29 - $15) - $20,900
= $70,000 - $20,900
= $49,100
For the new order a variable selling cost of $2 per unit would be eliminated, the contribution of the order will be
= 1680($20 - $15 + $2)
= 1680 * $7
= $11,760
This is the differential effect on profit.
