1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Nata [24]
3 years ago
11

Round Hammer is comparing two different capital structures: An all-equity plan (Plan l) and a levered plan (Plan Il). Under Plan

I, the company would have 205,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $1.73 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. a. Use M&M Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of the firm under each of the two proposed plans?
Business
1 answer:
Dominik [7]3 years ago
6 0

Explanation:

A). The computation of price per share is shown below:-

Debt outstanding ÷ (Stock outstanding of Plan 1 - Stock outstanding of

Plan 2)

= $1,730,000 ÷ (205,000 - 125,000)

= $21.63 per share

B a.) Under equity plan the value is

= Debt outstanding × Stock outstanding of Plan 1

= $21.63 × 205,000 shares

= $4,433,125

B b.) under the levered plan the value is

Price per share × Stock outstanding of Plan 2 + Debt outstanding

= $21.63 × 125,000 shares + $1,730,000

= $2,703,125 + $1,730,000

= $4,433,125

You might be interested in
A business school with plenty of classroom space that hires adjunct faculty for a semester to meet unusually high student demand
Naily [24]

Answer:

True

Explanation:

Given that a bottleneck is a term often used in business or any operational situation to describe the situation whereby there is overcrowding at a particular point in time of operation.

And to elevate bottleneck means to solve the issue of bottleneck by making it a priority. This can be done in many ways, one of which is to improve the workspace or make arrangements for additional space or machines.

Hence, it is TRUE that A business school with plenty of classroom space that hires adjunct faculty for a semester to meet unusually high student demand for courses is an example of elevating a bottleneck.

8 0
2 years ago
Kirkaid Company recorded the following transactions for the just completed month:
Illusion [34]

Answer:

The correct answer is $5,000.

Explanation:

According to the scenario, the given data are as follows:

Total raw material = $118,000

Direct material = $89,000

So, Indirect material = Total raw material - Direct material = $118,000 - $89,000

= $29,000

Total labor = $142,000

Direct labor = $122,000

So, Indirect labor = Total labor - Direct labor = $142,000 - $122,000

= $20,000

Additional actual manufacturing OH = $214,000

Applied manufacturing OH = $268,000

So, we can calculate the underapplied or overapplied overhead for the month by using following formula:

Underapplied or overapplied overhead = Applied manufacturing OH - Actual OH

= $268,000 - ( $29,000 + $20,000 + $214,000)

= $268,000 - $263,000

= $5,000

Hence, the overapplied overhead is $5,000.

6 0
3 years ago
You are given the following information on Kaleb's Welding Supply: Profit margin 6.9 % Capital intensity ratio .78 Debt–equity r
Tatiana [17]

Answer:

0.1563946140 or 15.64%

Explanation:

The computation of the sustainable growth rate is shown below:

But before that we need to do the following calculations

As we know that

Profit margin = net income ÷ Sales

So,

0.069 = $86,000 ÷ Sales

Sales = $1,246,376.81159

Now

Capital intensity ratio = Total assets ÷ Sales

Total assets is

= $1,246,376.81159 × 0.78

= $972,173.91304

And,

Debt - Equity ratio = Debt ÷ Equity = 0.9

Now, if debt is 0.9, and equity is 1, Thereforetotal assets is 1.9 (0.9 + 1).

So,

Equity = Total assets x 1 ÷ 1.9

= $972,173.91304 ÷ 1.9

= $511,670.480547

And,  

Return on Equity (ROE) = Net income ÷ Equity

= $86,000 ÷ $511,670.480547

= 0.16807692307 or 16.807692307%

And,

Dividend payout ratio = Dividend ÷ net income

= $16,800 ÷ $86,000

= 0.1953488372

Now  

Retention ratio (b) = 1 - dividend payout

= 1 - 0.1953488372

= 0.8046511628

So,  

Sustainable growth rate (SGR) = (ROE x b) ÷ [ 1 - (ROE × b) ]

= (0.16807692307% × 0.8046511628) ÷ [ 1 - (0.16807692307% × 0.8046511628) ]

= 0.1563946140 or 15.64%

6 0
3 years ago
All the following statements about residual value guarantees are correct about residual value guarantees, except that they:
lozanna [386]

Answer:

c. protect lessees against lessors who abuse leased assets.

Explanation:

The residual value guarantee may be defined as a guarantee that is made to the lessor where the value of an underlying asset will become at least some specified amount at the end of the lease. The guarantee is given by the party unrelated to a lessor.

The residual value guarantee provides to protect the lessor against the lessees who tries to abuse the leased assets. It does not protect the lessees against the lessors.

6 0
3 years ago
Andrew Carnegie and John D. Rockefeller:
Damm [24]
D. We’re both immigrants
4 0
3 years ago
Other questions:
  • M&M Proposition I with tax implies that:
    10·1 answer
  • Managers use a predetermined overhead rate for which of the following reasons?
    6·1 answer
  • A detailed plan for the future that is usually expressed in formal quantitative terms is known as a:
    15·1 answer
  • The company that you work for, mystical jewelry, wants to analyze data that come from other sites, such as measuring where peopl
    13·1 answer
  • There are 15 animal keepers working for the XYZ Company. Their supervisor is required to rate the performance of these workers b
    12·1 answer
  • If there is a recessionary gap in the short​ run, the Federal Reserve can eliminate the gap in the short run by undertaking a po
    9·1 answer
  • In the competitive-parity method of setting an advertising budget, the budget is set based on ________. Group of answer choices
    11·2 answers
  • GIVING AWAY BRAINLIST
    6·2 answers
  • Round Hammer is comparing two different capital structures: An all-equity plan (Plan I) and a levered plan (Plan II). Under Plan
    5·1 answer
  • we are evaluating a project that costs $848,000, has an eight-year life, and has no salvage value. assume that depreciation is s
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!