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valentinak56 [21]
3 years ago
15

Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earning

s are growing at a rate of 5%, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what is Firm L's cost of equity?
Business
1 answer:
Norma-Jean [14]3 years ago
5 0

Answer:

Firm L's cost of equity is 13.2%

Explanation:

In order to calculate Firm L's cost of equity we would have to calculate the following formula:

Firm L's cost of equity=Unlevered cost of equity+D/E*( Unlevered cost of equity-cost of debt)*(1-tax rate)

D/E = debt/equity

D/E = $200,000/$300,000

D/E=0.6666

Therefore, Firm L's cost of equity= 12%+0.6666*(12%-9%)*(1-0.4)

Firm L's cost of equity=13.2%

Firm L's cost of equity is 13.2%

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The net income for Sheridan Company for 2020 was $350,000. For 2020, depreciation on plant assets was $69,700, and the company i
enyata [817]

Answer:

350,000 net income

+69,700 depreciation

+13,300 loss on disposal

433,000 adjusted income

no change in working capital

cash generated from operating activities 433,000

Explanation:

We need to remove from the net incoem the non-monetary terms

The depreication is an accounting concept, it doesn't involve cash disbursements, so it is added.

Also the los son disposal doesn't involve using cash so is also removed.

Rule:

to remove a non-monetary expense we should add it.

to remove a non-monetary gain we should decrease it.

5 0
3 years ago
Mr.​ Beautiful, an organization that sells weight training​sets, has an ordering cost of ​$45 for the​ BB-1 set​ (BB-1 stands fo
andrew-mc [135]

Answer:

839.216

Explanation:

For we to calculate the total cost, we use the following

Total Cost = Carrying Cost + Stock out Cost

= 0+ $45 x 4 x [.2(100-80)+.2(120-80)+.1(140-80)] = 1368*

Now

Total Cost = Carrying Cost + stock out Cost

Total cost= [10 x 20]+40 x 4 x [.2990-50-20)+.1(110-50-20)]

Total cost = 200-1115.216+4

Total cost = 839.216

8 0
3 years ago
Under common law, most property issues can be settled by who has a good title. Explain why such traditional characteristics of p
Rom4ik [11]

Answer:

Traditional characteristics of property ownership, such as transfer, risk of loss, insurable interest, and right to encumber are "broken up" and subject to varying tests under the UCC to help create boundaries.

Explanation:

the Uniform Commercial Code (UCC), a standardized collection of guidelines that govern the law of commercial transactions.

Real estate ownership carries with it a complex set of rights, and the bundle of rights concept has traditionally been the way in which those rights are described and summarized.

Traditional characteristics of property ownership, such as transfer, risk of loss, insurable interest, and right to encumber are "broken up" and subject to varying tests under the UCC to help create boundaries and limits to control in other to avoid excesses.

6 0
3 years ago
A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $50
Artyom0805 [142]

Answer:

a. $(8000)

b. Company should choose alternative 1 and make bottles.

Explanation:

Particulars               Make Bottles            Buy Bottles  Differential

                                Alternative 1             Alternative 2

Purchase Price                  0                       $37                               $(37)

Freight Charges                 0                       $4                                $(4)

Variable cost                    $33                                                          $33

Fixed Cost                        $17                     $17                                  0

Cost per unit                    $50                    $58                              $(8)

Income / (Loss)                 $50,000            $58,000                      $(8,000)

b. The company should choose alternative 1 and make bottles. The buying of bottles will cost company loss of $8,000.

7 0
3 years ago
A conglomerate is ________ a giant corporation composed of many smaller corporations. a corporation in the manufacturing sector.
alexdok [17]

Answer:

a giant corporation composed of many smaller corporations.

Explanation:

This option is not 100% right, but the other options were completely wrong. A conglomerate is a corporation that operates in totally different and unrelated industries. For example, a conglomerate can operate in the energy sector, financial services, education services, cruise lines, and agriculture. No two industries are even related to one another, and that is what operates a conglomerate from a normal corporation. E.g. Samsung is a conglomerate because it operates an electronics business, manufactures cars, builds ships, operates funeral homes, etc.

4 0
3 years ago
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