Answer:
They dont earn no more than $28,000 a year
Answer: The firm issued common stock in 2013.
Explanation:
Since the firm has never paid a dividend to its common stockholders, we can see that the firm issued common stock in 2013.
Looking clearly at the common equity section, we can see that there was an increase in the common stock from $1000 to $2000.
The reduction in the retained earnings from $2340 to $2000 also shows that there was a loss.
Based on the above scenarios, we can say that the firm issued common stock in 2013.
Answer:
C. Evaluate and motivate workers
Explanation:
This is the taks for middle mamagement.
Answer:
First we need to compute levered cost of equity
Ro = 15.40%
D/E ratio = 0.40/(1-0.40) = 0.6667
Rd=7.2%
We have following formula for levered cost of equity using MM model proposition II:
Without taxes
Re = Ro + (Ro – Rd) x (1-t) x D/E
= 0.1380 + (0.1380-0.0720)x (1-0.0)x0.6667
= 0.1380 + 0.0440
= 18.20%
Therefore, new cost of equity would be 18.20%.
With taxes
Re = Ro + (Ro – Rd) x (1-t) x D/E
= 0.1380 + (0.1380-0.0720)x (1-0.34)x0.6667
= 0.1380 + 0.0290
= 16.70%
Therefore, new cost of equity would be 16.70%.
