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Likurg_2 [28]
3 years ago
5

The required return on the stock of Moe's Pizza is 10.8 percent and aftertax required return on the company's debt is 3.40 perce

nt. The company's market value capital structure consists of 69 percent equity. The company is considering a new project that is less risky than current operations and it feels the risk adjustment factor is minus 1.9 percent. The tax rate is 39 percent. What is the required return for the new project? rev: 12_20_2018_QC_CS-152115 Multiple Choice 10.41% 6.19% 8.51% 9.99% 6.61%
Business
1 answer:
garik1379 [7]3 years ago
8 0

Answer:

The required return for the new project is 6.87%

Explanation:

In order to calculate the required return for the new project we would have to calculate the Weighted Average Cost of Capital (WACC) adjusted by risk adjustment factor .

The Weighted Average Cost of Capital (WACC) = [After Tax Cost of Debt x Weight of Debt] + [Cost of equity x Weight of Equity]

After -tax Cost of Debt = 3.40%

Cost of Equity = 10.80%

Weight of Debt = 0.39

Weight of Equity = 0.69

Therefore, the Weighted Average Cost of Capital (WACC) = [After Tax Cost of Debt x Weight of Debt] + [Cost of equity x Weight of Equity]

= [3.40% x 0.39] + [10.80% x 0.69]

= 1.32% + 7.45%

= 8.77%

The required return for the new project = Weighted Average Cost of Capital – Risk Adjustment Factor

= 8.77% - 1.90%

= 6.87%

The required return for the new project is 6.87%

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Helmers Corporation manufactures a single product. Variable costing net operating income last year was $74,000 and this year was
gogolik [260]

Answer:

$46,400

Explanation:

The computation of the absorption costing net operating income last year is shown below:

= Net operating income under variable costing + Fixed overhead deferred in ending inventory - Fixed overhead released in beginning inventory

= $74,000 + $0 - $27,600

= $46,400

All other information which is given in the question is not relevant. Hence, ignored it

4 0
3 years ago
According to the IASB Framework for the Preparation and Presentation of Financial Statements, the qualitative characteristic of
Alexus [3.1K]

Answer:

NEUTRALITY, COMPLETENESS AND FREE FROM ERRORS.

Explanation: IASB( International accounting standards board) is board regulating the preparation of accounting Reports or statements. It released its first framework called CONCEPTUAL FRAMEWORK in the year 1989.

The qualities of a faithful conceptual framework by IASB is to guarantee NEUTRALITY, COMPLETENESS AND ENSURE THAT THE STATEMENT IS FREE FROM ERRORS.

This framework will help to prevent disputes and manage standards in preparation of account statements.

4 0
3 years ago
The first decision a manager must make in sales force management is​ _______________. A. recruitment and selection processes for
Gala2k [10]

Answer:

The correct answer is B

Explanation:

Sales force​ management is the system which is basically the information system and its objective is to help the organisation to grow better, faster through automating the work which the sales management and sales force.

So, the first and the foremost decision which a manager need to take in this system is to design or create the structure as well as the strategy of the sales force.

7 0
3 years ago
Chris has three options for settling an insurance claim. Option A will provide $1,500 a month for 6 years. Option B will pay $1,
Papessa [141]

Answer:

  • <u><em>Option B. $1,025 a month for 10 years.</em></u>

Explanation:

Calculate the present value of each option:

     \text{Monthly rate: } 6.8\%/12 = 0.068/12 = 0.005\overline 6

Formula:

        PV=C\times \bigg[\dfrac{1}{r}-\dfrac{1}{r(1+r)^t}\bigg]

Where:

  • PV is the present value of the constant monthly payments
  • r is the monthly rate
  • t is the number of moths

<u>1. Option A will provide $1,500 a month for 6 years. </u>

         PV=$\ 1,500\times \bigg[\dfrac{1}{(0.005\overline 6}-\dfrac{1}{0.005\overline 6(1+0.005\overline 6)^{(6\times12)}}\bigg]

         PV=\$ 88,479.23

<u>2. Option B will pay $1,025 a month for 10 years. </u>

         PV=$\ 1,025\times \bigg[\dfrac{1}{(0.005\overline 6}-\dfrac{1}{0.005\overline 6(1+0.005\overline 6)^{(10\times12)}}\bigg]

         PV=\$ 89,068.22

<u>3. Option C offers $85,000 as a lump sum payment today. </u>

<u></u>

  • PV = $85,000
<h2 /><h2> Conclusion:</h2>

The present value of the<em> option B, $1,025 a month for 10 years</em>, has a the greatest present value, thus since he is only concerned with the <em>financial aspects of the offier</em>, this is the one he should select.

3 0
3 years ago
Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of
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Answer and Explanation:

The journal entry is shown below:

Peter ($174,000 - ($66,000 ÷ 2)) $141,000

Chong ($162,000 - ($66,000 ÷ 2)) $129,000

        To Cash $270,000

(Being the distribution should be recorded)

For this the capital accounts are debited as it reduced the stockholder equity and credited the cash as it also decreased the assets

4 0
3 years ago
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