Answer:
a. What is the total market value of the firm without leverage?
- = $2 million / 50% = $4 million
b. Suppose you borrow $1.0 million. According to MM, what fraction of the firm's equity will you need to sell to raise the additional $1.0 million you need?
c. What is the value of your share of the firm's equity in cases (a) and (b)?
- a) = $4 x 50% = $2 million
- b) = $2 million
Explanation:
if successful price = $30 million
if unsuccessful price = $0
investment required = $2 million
in exchange of 50% of the firm
if you borrow $1 million, you will have to give up 33.33% of the company in exchange for the other $1 million needed
= $1 / ($4 - $1) = $1 / $3 = 33%
according to Modigliani and Miller (MM), the value of a firm is determined by its profit.
Answer:
Product U23N
$
Sales 730,000
Less: Variable cost 350,000
Contribution 380,000
Less: Avoidable fixed manufacturing expenses 144,000
Avoidable fixed selling and administrative cost <u>93,000</u>
Net contribution <u> 143,000</u>
Product U23N should not be discontinued because it has a positive contribution. If the company discontinued the product, the total profit of the company reduces by $143,000.
Explanation:
In this case, we need to determine the net contribution of the product. Net contribution is the excess of sales over variable cost and avoidable fixed cost. Product U23N should not be discontinued because it has a positive net contribution. If the product is deleted, there will be a reduction in total profit of the company by $143,000.
The true statement out of all is
B) Georgeland has both an absolute and a comparative advantage in producing clothing.
Explanation:
This is because Absolute advantage is when one firm or a producer is able to produce more of a product using less resources or less time or more of the product in the same resources or same time as the other.
Comparative advantage is found out at the added bonus of having the product be as viable as it is advantageous which means that the producer could also be making another product and would have the advantage in that too so either one of them is equally profitable.
Answer:
The company pays $ 500 yearly fee to use Mega Tax Software which is record as fixed costs. Fixed costs do not differ with the variation in the manufacturing levels. Conversely, the fixed cost per unit declines as manufacturing increases, as the same fixed costs are extent over more units. Also the fixed costs per unit rises as the production decreases. Therefore when the production level increased from 300 units to 500 units, the fixed costs per unit reduced and since the variable cost per unit is the same at $ 10 per unit regardless of the levels of production, the total cost per return declines from $ 11.67 to $ 11.
Answer:
D) overemphasizing some issues and underemphasizing others
Explanation:
Apparently Ms. Bisset has a lot of good qualities as an employee and human being, but her supervisor, Mr. Reber is behaving as if all her actions were great, when they are not. Generally performance appraisals do not focus on only one activity or performance measurement, it is more like a weighted appraisal. But that doesn't mean you should focus only on the tasks that you want an forget about the rest.
It is very uncommon that someone will do great n every single aspect or category, e.g. good salespeople are very competitive and depending on how sales are distributed (by sector, region or not differentiated at all) may not be very social or hopeful with their coworkers. People who like accounting are boring, no one is perfect.
The problem here is that Mr. Reber likes Ms. Bisset a little too much, and he is considering only her good qualities as important, when a salesperson can have many defects, but he/she must be able to sell. It's like a pitcher that cannot pitch, they are useless for that position. Maybe she could work somewhere else in the company that better fits her abilities.
