Answer:
The value of the firm or worth of the firm is $147058.82 rounded off to 2 decimal places
Explanation:
We first need to calculate the required rate of return for this firm that will be used as the discount rate in the valuation of the firm using the discounted cash flow methods.
Using the CAPM we can calculate the required rate of return as,
r = rRF + Beta * (rM - rRF)
Where,
- rRF is the risk free rate
- rM is the return on Market
So,
r = 0.04 + 0.4 * (0.11 - 0.04)
r = 0.068 or 6.8%
As the cash flows the firm can generate are expected to remain constant through out and they are generated after equal interval of time, this can be treated as a perpetuity.
The present value of a perpetuity is calculated as follows,
Present Value of perpetuity = Cash Flow / r
Present value of perpetuity = 10000 / 0.068
Present value of perpetuity = $147058.8235
So, the value of the firm or worth of the firm is $147058.82 rounded off to 2 decimal places
Answer:
They will have a greater amount of financial income
Answer:
d. Continue production in the short run, but exit the business in the long run unless prices are expected to rise or costs to fall..
Explanation:
Currently, their sales revenue less variable cost is positive as it can sale at $1.50 dollars and the variables cost are less than that. Therefore, there are fixed cost thefirm can pay because it produce.
Now, in the long-run when the firm can exit the market it should consider to do so if it continues to get an average cost above the selling price.
Answer:
PV of the six year annuity = $201,923.57
Explanation:
<em>This is an example of an advanced annuity. A series of constant amount receivable for certain number of years with first one occurring immediately.</em>
Present Value of the annuity for the next five years=
A× 1- (1+r)^(-n)/r
A- annual cash flow, n- number of period, r-interest rate per period
A- 43,000, r- 11%, n- 5
=43,000× (1- 1.11^(-5))/0.11
=158,923.57
The first cash flow of 43,000 occurs immediately , hence it is already discounted. Hence the PV of the total cash flows would be the sum of the PV of the next five year cash flows and the one received now.
Hence,
PV = 158,923.57 + 43,000= 201,923.57
PV of the six year annuity = $201,923.57
Answer:
a promotional alternative that uses direct communication with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet.
Explanation:
Direct marketing involves communication of a product to a target customer without using advertising agents as middle men. Customers are identified and contact is made directly to generate a buying decision from them.
This method gives quick feedback and action from the customer.
Channels such as mail, text, and email can be used to contact the customer directly