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
Snezhnost [94]
3 years ago
14

Katlin Markets is debating between a levered and an unlevered capital structure. The all-equity capital structure would consist

of 75,000 shares of stock. The debt and equity option would consist of 40,000 shares of stock plus $320,000 of debt with an interest rate of 6.25 percent. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.a.$46,333.33b.$44,140.71c.$42,208.15d.$49,666.67e.$42,857.14
Business
1 answer:
Goshia [24]3 years ago
8 0

Answer:

e. $42,857.14

Explanation:

The computation of the break-even level of earnings before interest and taxes between these two options is shown below:

(EBIT) ÷ (Number of shares) = (EBIT - Interest) ÷ Number of shares  

(EBIT) ÷ (75,000 shares) = (EBIT - $20,000) ÷$40,000

40,000 × EBIT = 75,000 × EBIT - $1,500,000,000

35,000 × EBIT = $1,500,000,000

After solving this,  

The EBIT would be $42,857.14

The interest expense

= $320,000 × 6.25%

= $20,000

You might be interested in
Situation I On January 1, 2020, Bramble, Inc. signed a fixed-price contract to have Builder Associates construct a major plant f
Burka [1]

Answer:

$88,920  

Explanation:

capitalized interest = weighted average accumulated expenditure for the year x interest rate of the loan = $889,200 x 10% = $88,920

Capitalized interest can be added to the basis of the new building that is being constructed. This way, the building's depreciable value will increase.  

8 0
3 years ago
Nancy has been asked to prepare a presentation for her class that compares the market share data of three breakfast cereals from
tresset_1 [31]
Bar graph and ur welcome bby
3 0
3 years ago
Read 2 more answers
preparing adjusting and closing entries across two periods norton company closes its accounts on december 31 each year. the comp
Rama09 [41]

Answer:

Requirement: <em>Prepare journal entries to: (a) Accrue the salaries payable on December 31, b) Close the Salaries Expense account on December 31 (the account has a year-end balance of $250,000 after adjustments), (c) Record the salary payment on January 7</em>

Date     Accounts title and Explanation      Debit          Credit

31-Dec  Salaries expense                             $1,880

                   Salaries Payable                                             $1,880

             (To record accrued salaries )  

31-Dec   Retained Earnings                          $250,000  

                     Salaries Expense                                          $250000

              (To close salaries expense account)

07-Jan   Salaries Payable                             $1,880

              Salaries expense                            $2,920

                     Cash                                                                $4,800

              (To record payment of salary)

3 0
3 years ago
Which of the following statements, if any, is (are) true?
irina1246 [14]

Answer:

The answer would be C

Explanation:

When it comes to considering life insurance as an investment, you’ve probably heard the adage, “Buy term and invest the difference.” This advice is based on the idea that term life insurance is the best choice for most individuals because it is the least expensive type of life insurance and leaves money free for other investments.

Permanent life insurance, the other major category of life insurance, allows policyholders to accumulate cash value, while term does not, but there are expensive management fees and agent commissions associated with permanent policies, and many financial advisors consider these charges a waste of money.

When you hear financial advisers and, more often, life insurance agents advocating for life insurance as an investment, they are referring to the cash-value component of permanent life insurance and the ways you can invest and borrow this money.

There are many arguments in favor of using permanent life insurance as an investment. The issue is, these benefits aren’t unique to permanent life insurance. You often can get them in other ways without paying the high management expenses and agent commissions that come with permanent life insurance.

Liquidity risk is one of the major risks faced by financial entities (such as banks, insurance companies and pension funds) and one of the primary causes of the 2008 financial crisis. Yet many entities with financial exposure cannot quantify the liquidity risks to which they are exposed.

In layman’s terms, liquidity risk can be described as the risk that arises from being unable to sell an asset in a timely manner and for its “true value.” There are two key dimensions of liquidity risk: one, the time required to transact in an asset, and two, the price at which the asset can be bought or sold.

7 0
3 years ago
Read 2 more answers
BioGrow Pharma Inc. wanted its research partner, an R&amp;D company, to develop a cancer vaccine. However, the project required
grigory [225]

Answer: credible commitment

Explanation:

From the question, we are informed that BioGrow Pharma Inc. wanted its research partner, an R&D company, to develop a cancer vaccine but that the project required huge capital investments, and its research partner was not ready to solely face the risks involved.

Therefore, to gain its partner's confidence and to prove its involvement, BioGrow Pharma invested $100 million in the project. This investment made by BioGrow Pharma will result in a credible commitment.

4 0
3 years ago
Other questions:
  • Savings account A and savings account B both offer APRs of 6%, but savings account A compounds interest semiannually, while savi
    15·1 answer
  • What future IT capability needs (both physical and human) could the organisation have with respect to document design and produc
    11·1 answer
  • At the beginning of march, janet opened a checking account with her first paycheck of $153.82. during the month, she withdrew $4
    9·2 answers
  • The market price people are willing to pay for a unit of a particular commodity is determined by A. the sum of average and margi
    15·1 answer
  • Pacific West Utility has made a takeover offer to the shareholders (51% of the shares) of San Diego Edison. The board and manage
    7·1 answer
  • A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the g
    13·1 answer
  • Hamlet sends two letters announcing his return to england, one to horatio and one to claudius. why might shakespeare have chosen
    13·1 answer
  • Hayden, a buyer for a medium-sized company, is assessing the value of competing software products for use in his firm. Which of
    13·1 answer
  • Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for th
    11·1 answer
  • How do you wheeze?becasue im lost
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!