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
RUDIKE [14]
2 years ago
5

Moji Mont Company has a debt-equity ratio of .25. The required return on the company’s unlevered equity is 15 percent, and the p

retax cost of the firm’s debt is 8.0 percent. Sales revenue for the company is expected to remain stable indefinitely at last year’s level of $18,500,000. Variable costs amount to 70 percent of sales. The tax rate is 34 percent, and the company distributes all its earnings as dividends at the end of each year.
If the company were financed entirely by equity, how much would it be worth?
Business
1 answer:
Gala2k [10]2 years ago
4 0

Answer:

The company's worth is $24,420,000 if it is financed entirely by equity

Explanation:

The value of the company if financed entirely by equity is the perpetual cash flows that can be derived  from the company using the required rate of return  on the company's un-levered equity at 15%.

Sales                                                  $18,500,000

Variable costs(70%*$18,500,000)   ($12,950,000)

EBIT                                                    $5,550,000

tax at 34%(34%*$5,550,000)            ($1,887,000)

Net income                                          $3,663,000.

Company's worth= $3,663,000/15%

                             =$24,420,000

You might be interested in
Perpetuities have:
sveticcg [70]

Answer:

b) Equal payments and an infinite life

Explanation:

A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever.

7 0
3 years ago
The following information was taken from Baxter Department Store's financial statements:
vodka [1.7K]

Answer:

500,000÷  200,000 = 2.5

Explanation:

inventory turnover is calculated as

cost of goods sold ÷ Average inventory

From the information of Baxter department store's financial statement, cost of goods sold can be calculated as

Opening inventory + purchases - closing inventory  

100,000 + 700,000 - 300,000 = 500,000

cost of goods sold = 500,000

Average stock is calculated as opening inventory + closing inventory ÷ 2

100,000 + 300,000 ÷ 2 = 200,000  

Average inventory = 200,000

Therefore inventory turnover = 500,000÷  200,000 = 2.5

7 0
3 years ago
Real GDP per capita is NOT an adequate measure of
mrs_skeptik [129]

Answer:

The correct answer is the well-being of each person in an economy.

Explanation:

Also known as the "Standard of living", this is something that cannot be reflected from the per capital income, whether it's nominal or real. The reason is when you divide the GDP from the population, the assumption is all the GDP is distributed among the population equally.

But this is not the case in the real world and there are many variances, discrimination, discrepancies and inequalities when the wealth and resources are distributed.

5 0
3 years ago
Western Union is in the business of providing a medium for international money transfers. Through the services of Western Union,
tatiyna

Answer: core service

                                                 

Explanation: In simple words, core service refers to the service which are of highly value and importance to the user or provider or both.

These services are considered be essential for smooth operations of an economy or the organisation as the case may be.

In the given case, Western union has the business of transferring payments internationally. Hence we can conclude that they are providing the core service of their business.

5 0
3 years ago
Given the following two potential locations to construct an urgent care, use incremental B/C ratio to determine which location,
White raven [17]

Answer:

The incremental benefit cost ratio is less than 1 therefore we must select site 1.

Explanation:

The incremental BCR can be determined using the following formula

\Delta BC_R = \frac{AW_B-AW_D-AW_M}{AW_i}

AW_C=1,000,000(A/P, 8% , 10)

⇒ AW_C= 1,000,000 \times \frac{0.08}{1-1.08^-^1^0}

⇒ AW_2=2,000,000(A/P, 8%, 20)

⇒ AW_2= 2,000,000 \times \frac{0.08}{1-1.08^-^2^0}

⇒AW_C_2 = $203,704.42

Incremental initial investment = 203,704.42 - 149,029.49

= $ 54,674.93

Incremental benefits = 580,000 - 520,000 = 60,000

Incremental O&M = 75,000 - 80,000 = - $ 5000

Incremental Disbenefits = 140,000 - 90,000 =$ 50,000

\Delta BC_R = \frac{60,000-50,000-(-5000)}{54,674.93} \\\\\Delta BC_R=0.2743

All solving using the present worth method also incremental benefit cost ratio comes out to be 0.2743.

The incremental benefit cost ratio is less than 1 therefore we must select site 1.

3 0
2 years ago
Other questions:
  • Rob and Lori purchased a home for $350,000 with an additional $5,000 in related purchase costs and then added a garage at a cost
    5·1 answer
  • Oliver's company is planning the launch of their hybrid cars. The company has included "never-before-seen product benefits in th
    6·1 answer
  • Mike has inherited his father's traditional ira. as beneficiary, he will pay ____ taxes on any money withdrawn.
    5·1 answer
  • Pittsboro Corporation produces and sells a single product. Data for that product​ are: Sales price per unit Variable cost per un
    6·1 answer
  • Trimble Graphic Design receives $1,800 from a client billed in a previous month for services provided. Which of the following ge
    9·1 answer
  • Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below.
    5·1 answer
  • Which of the following statements is CORRECT?
    12·1 answer
  • Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm’s capacity. If he adds one mor
    8·1 answer
  • The assets of Star Company are $170.000 and the total liabilities are $10,000. The equity is
    15·1 answer
  • Suppose buyers of rackets and tennis balls regard the two goods as complements. then an increase in the price of rackets will ca
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!