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Alborosie
3 years ago
13

Quillpen Company is unlevered and has a value of $45 billion. An otherwise identical but levered firm finances 25% of its capita

l structure with debt. Under the MM zero-tax model, what is the value of the levered firm? Enter your answer in billions. For example, an answer of $1 billion should be entered as 1, not 1,000,000,000. Round your answer to the nearest whole number.
Business
1 answer:
Alex_Xolod [135]3 years ago
5 0

Answer:

We can conclude that the value of levered firm is 40 billion.

Explanation:

Under the MM zero tax model value of levered firm is equal to value of unleveled firm

Under MM zero tax model VL = VU

VL= value of levered firm  

VU= value of unleveled firm  

Value of levered firm = value of unleveled firm + (tax rate × value of debt)

Firm capital structure is included debt and equity , when there is no tax it means value of levered and unleveled firm value is same

Therefore, We can conclude that the value of levered firm is 40 billion.

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Answer:

For Bagels = 1.33

For Donuts = -1.33

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Using the midpoint method, Alex's percentage change in income is given by the difference in income divided by the average income:

\%I =\frac{\$4,000-\$2,000}{\frac{\$4,000+\$2,000}{2}}\\\%I=66.67\%

Alex's percentage change in demand for both bagels and donuts is given by the difference in the quantity consumed divided by the average consumption:

\%B =\frac{10-6}{\frac{10+6}{2}}\\\%B=50.00\%\\\%D =\frac{9-15}{\frac{15+9}{2}}\\\%D=-50.00\%

Alex's income elasticity of demand for bagels and donuts, respectively, is:

E_B=\frac{\%I}{\%B}=\frac{66.67\%}{50\%} \\E_B=1.33\\\\E_D=\frac{\%I}{\%D}=\frac{66.67\%}{-50\%} \\E_D=-1.33

His income elasticity of demand for bagels is 1.33, while for Donuts it is  -1.33.

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When preparing a journal entry for a transaction that affects retained earnings, the "Retained Earnings" account should not be d
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Generally, retained earnings are not changed by direct posting except it is prior year adjustment. in some entities, the amount that is transferred to retained earnings is system generated. Most transactions that affect retained earnings are debited or credited to account which ultimately affects retained earnings

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