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atroni [7]
4 years ago
14

Meyer & Co. expects its EBIT to be $106,000 every year forever. The firm can borrow at 7 percent. The company currently has

no debt, and its cost of equity is 14 percent.
a. If the tax rate is 25 percent, what is the value of the firm? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What will the value be if the company borrows $210,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

a. Value of the firm __.
b. Value of the firm___.
Business
1 answer:
liubo4ka [24]4 years ago
5 0

Answer:

Consider the following calculations

Explanation:

a. Value of Firm=(EBIT*(1-Tax))/ke

=(106000*(1-25%))/.14

=567857.14

b. Value of Firm=U unlevered + Debt*(1-tax)

V L = $567857.14+210000*.25

=620357.14

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Red when choosing a form of ownership
siniylev [52]

Answer:

see below

Explanation:

1. Private Limited Company

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2. Public Limited Company

A public limited company is recognized as a legal and separate entity from its owners. Unlike a private limited company, the shares of a public limited company are traded in the security exchange markets. It means ownership of a public company is open to the public. The management of SHINING STAR BUS COMPANY (PTY) Ltd wants to convert it to a public limited company. After the conversion, its shares will be traded at the Johannesburg Security Exchange(JSE).

4 0
3 years ago
Mary offers to buy Hal's desktop computer for $400. Hal sends Mary an e-mail of acceptance. The $400 is to be paid upon Hal's de
GenaCL600 [577]

Answer:

A. This is a bilateral, valid, executory contract

Explanation:

As in the given scenario, the offer and acceptance is made between the Mary and Hal which reflect the valid contract as in this both parties have expresses to enter into a contract

Plus, it is a bilateral contract in which both parties agree to do his/ her positions.

And, it is also an executory contract in which the contract is completed at some future i.e in this case the contract is completed when delivery and payment are made.

7 0
3 years ago
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per
Tanzania [10]

Answer:

50%

Explanation:

The formula and the computation of the contribution margin ratio is shown below:

Contribution margin ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit  

= $40 per unit - $20 per unit

= $20 per unit

So, the CM ratio is

= ($20 per unit) ÷ ($40 per unit) × 100

= 50%

8 0
3 years ago
Eight months ago, you purchased 400 shares of Winston, Inc. stock at a price of $54.90 a share. The company pays quarterly divid
DIA [1.3K]

Answer:

c)    - 8.4%

Explanation:

<em>The return on a stock is the sum of the capital gains(loss) plus the dividends earne</em>d.

<em>Capital gain is the difference between he value of the stocks when sold and the cost of the shares when purchased.</em>

<em>Total shareholders Return = </em>

<em>(Capital gain/ loss + dividend )/purchase price  ×  100</em>

So we can apply this to the formula:

<em>Dividend</em> = $0.5 × 2 = $1

<em>Capital loss</em> = $49.30 - 54.90

% return =( $1 + ($49.30 - 54.90))/54.90

=-8.4%

Total percentage return on this investment = -8.4%

6 0
3 years ago
The main reason the usefulness of Pareto optimal policies is limited as a policy guide is that: Question 2 options: it is too su
Nadya [2.5K]

Answer:

real-world changes in which no one is harmed are rare or nonexistent.

Explanation:

Pareto optimality, also known as Pareto efficiency was named after Vilfredo Pareto and it refers to an economic system in which no additional changes can make a person better off without making at least one person worse off.

This ultimately implies that, when there's a maximum level of efficiency in the allocation of goods and resources in an economy and no further changes can be made without making at least one person worse off. Thus, it can only exist in theory but not in reality.

The main reason the usefulness of Pareto optimal policies is limited as a policy guide is that real-world changes in which no one is harmed are rare or nonexistent because the goods and resources cannot be reallocated.

6 0
3 years ago
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