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
ololo11 [35]
3 years ago
6

Orange Inc., an orange juice producer with a current debt-to-equity ratio of 2, is considering expanding its operations to produ

ce toothpaste. Unsurprisingly, the toothpaste industry faces a different set of risks than the orange juice industry. However, the executives at Orange Inc. observe that Paste Inc., a toothpaste company, has a cost of equity of 12%, a cost of debt of 6%, and a debt-to-value ratio of 40%. Orange Inc. plans to finance its expansion into toothpaste production with 50% debt and 50% equity. The cost of debt for Orange Inc. is also 6%, and the corporate tax rate is 25%.
Required:
Solve for the discount rate that Orange Inc. should use when evaluating whether to go forward with the expansion.
Business
1 answer:
postnew [5]3 years ago
6 0

Answer:

8.25%

Explanation:

Orange, Inc. should calculate the MARR (minimum acceptable rate of return) for this project using the following:

Re = 12% (similar to Paste, Inc., so it can be considered the industry's average)

Rd = 6% x (1 - 25%) = 4.5%

MARR = (1/2 x 12%) + (1/2 x 4.5%) = 6% + 2.25% = 8.25%

This calculation is similar to calculating a company's WACC since you must determine the weighted cost of financing the project.

You might be interested in
How do people become successful as a real estate developer?​
Roman55 [17]

Hello there!

A real estate developer job is to get houses to sell them, get land to build houses and sell them, and get previous owned houses and sell them. They pretty much get property and sell it. As a real estate developer, the main goal that someone should have is to <u>make more money than they paid for the property</u>. This means that they would need to be making profit in order to really see a progress in income.

Let's give you an example when a real estate developer buys a house:

Johan, a real estate developer, bought a house $275,000. He then goes on a website and advertises the house for $285,000.

What Johan is trying to do here is make profit form the house he just purchased, since the extra money he will be getting if the house is sold will be a surplus to the original amount.

Let's give you an example when a real estate developer buys land:

Susan buys 1 acre of land for $1.2 million, she then has a construction crew build a house, and that costed her $750,000.

At the end of the day, Susan spent $1.95 million (1,950,000) on the house in total.

She then sells the house on a website for $2.5 million (2,500,000).

This means that Susan made a surplus of $550,000 from the price she originally payed for.

It's best when a real estate developer sells property for more than what they payed for, so they would be making profit (extra money). It's bad when a real estate developer tries to sell a house for lower than they originally payed for, then they would be losing money. That's why when there is a specific price for a house, a real estate developer usually doesn't want to drop the price of the house any cheaper; they want to stick with their price so they could make money.

A real estate developer could also start their own company, and make more profit if they stick to the trick of selling the property for more than what they paid for. If they stick to the trick, then they would be making even more money since they would have multiple people in a company doing it all at once, in different places too.

4 0
3 years ago
How are logical operators used?
Bess [88]

Answer:

To identify and correct errors

Explanation:

4 0
2 years ago
Which of the following items is included in Japan’s GDP? A. the estimated value of production accomplished at home, such as ba
noname [10]

Answer:

D) None of the above is included in Japanese GDP.

Explanation:

A country's GDP includes the value of all the finished and legal goods and services produced in an economy during one year.

GDP = consumption + investment + government spending + net exports

  • Vegetables and fruits grown and consumed by an individual are not included in the GDP, unless they sell them to someone else.
  • Illegal goods ans services are not included in the GDP.
  • Imports, foreign products sold in a domestic market, lower the GDP since they lower net exports.
8 0
3 years ago
Carmen is giving a persuasive presentation at her university tomorrow. During the speech design process, Carmen asks herself why
Mademuasel [1]

Answer:

Letter a is correct. <u>Audience analysis.</u>

Explanation:

Audience analysis is the preparation stage for a presentation, and is relevant for audience evaluation and definition so that communication is appropriately addressed to them.

Audience definition is important for the direction of the presentation, so you can create an engaging presentation that will create the intended understanding of the presenter and positively impact the audience. For this it is necessary to know some characteristics of the public, such as age group, level of knowledge of the subject, interest, culture and others, in order to trace the ideal profile and the direction to occur effectively.

5 0
3 years ago
A point outside (to the right of) the production possibilities curve of a nation implies that this nation is using its resources
PtichkaEL [24]

Answer:

is not attainable for this nation

Explanation:

The Production possibilities frontiers is a curve that shows the various combination of two goods a company can produce when all its resources are fully utilised.  

The PPC is concave to the origin. This means that as more quantities of a product is produced, the fewer resources it has available to produce another good. As a result, less of the other product would be produced. So, the opportunity cost of producing a good increase as more and more of that good is produced.

Point outside the curve or to the right of the curve means that the production level is not attainable given the level of resources

Points inside the production possibilities curve means that the nations resources are not being fully utilised

Factors that cause the PPF to shift  

1. changes in technology.  

2. changes in available resources.  

3. changes in the labour force.  

8 0
3 years ago
Other questions:
  • A company manufactures and sells a product for $124 per unit. The company's fixed costs are $72,760, and its variable costs are
    6·1 answer
  • Physical context or setting of the speech may refer to:
    9·2 answers
  • HHH Inc. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-s
    6·1 answer
  • Coming Home Corporation uses a weighted-average process costing system to collect costs related to production. The following sel
    11·1 answer
  • Alex paid $600 to Rita, his ex-wife, for child support. Under the terms of the divorce decree, Alex claims the dependency exempt
    5·1 answer
  • A key element of customer relationship management is to: keep the price of goods as low as possible. develop a strategy to achie
    5·2 answers
  • The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance. The follow
    9·1 answer
  • Girls between the ages of 8 and 15 are one of the growing markets for high-end shoe manufacturers, and podiatrists say the trend
    13·1 answer
  • How does the format of a memo differ from that of an e-mail? please answer asap
    13·1 answer
  • An example of consumer spending when calculating the GDP using the expenditures approach is _____.
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!