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Stella [2.4K]
3 years ago
11

A study has been conducted to determine if Product A should be dropped. Sales of the product total $224,000 per year; variable e

xpenses total $156,800 per year. Fixed expenses charged to the product total $100,800 per year. The company estimates that $44,800 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall net operating income would: Multiple Choice decrease by $22,400 per year. increase by $22,400 per year. decrease by $11,200 per year.
Business
1 answer:
jek_recluse [69]3 years ago
7 0

Answer: Decrease by $11,200 per year.

Explanation:

First let's calculate the income if the product is not dropped.

Calculting income would be,

= Sales - Variable Costs - Fixed Costs

= 224,000 - 156,800 - 100,800

= -$33,600

Income(loss) would be a ($33,600) if the product is kept.

If the product is discontinued, it is given that $44,800 in fixed costs will still continue.

These fixed costs cannot be covered in part by the Sales because the product will be discontinued. So that means the net operating Income would simply be a $44,800 loss.

The difference between these 2 options is therefore,

= 44,800 - 33,600

= $11,200

This means that if Product A is stopped, the net operating income will decrease by a further $11,200 because there is no revenue to cover the fixed assets in part. The last option is correct.

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Fama’s Llamas has a WACC of 9.7 percent. The company’s cost of equity is 12 percent, and its pretax cost of debt is 7.5 percent.
Bezzdna [24]

Answer:

0.4766

Explanation:

Given:

WACC = 9.7%

Company’s cost of equity = 12%

Pretax cost of debt = 7.5%

Tax rate = 35%

Now,

WACC

=  Weight × Cost of equity + (1 - weight) × Pretax cost of debt × (1-tax rate)

or

0.097 = weight × 0.12 + ( 1 - weight ) × 0.075 × (1 - 0.35)

or

0.097 = 0.12 × weight + 0.04875 - 0.04875 × weight

or

0.04825 = 0.07125 × weight

or

weight = 0.6772

also,

weight = \frac{\textup{Equity}}{\textup{Debt + Equity}}

or

\frac{\textup{1}}{\textup{weight}}  = \frac{\textup{Debt+equity}}{\textup{Equity}}

or

\frac{1}{0.6772} = \frac{\textup{Debt}}{\textup{Equity}}  + 1

or

1.4766 = \frac{\textup{Debt}}{\textup{Equity}}  + 1

or

\frac{\textup{Debt}}{\textup{Equity}}  = 0.4766

5 0
3 years ago
What are the requirements for something to be used as money?
Anastasy [175]
For it to have international value
7 0
2 years ago
Matt is considering the purchase of a condo on a mortgage. However, he is not sure on the amount of mortgage he is eligible for.
Rudiy27

Answer:

A. Prequalification

Explanation:

First, the Options to the Question

a. Prequalification

b. A contingency clause

c. A Multiple Listing Service

d. Due diligence

What is a PreQualification in Mortgage Processing

Because most persons who are interested in buying a home do not have hundreds of thousands of dollars in cash to purchase the home of their dreams, the concept of mortgage is to approach a lender who will then advance the needed sum for the purchase and then the borrower will pay the advanced sum over some time (most times up to 30 years) at an interest rate.

A PreQualification is a process through which the lender evaluates the creditworthiness of the borrower and also decide the amount of loan the borrower is entitled to. This is done through the financial documents and records made available to the lender by the borrower

One important takeaway from a prequalification is that it is an approximation of what a borrower is entitled to base solely on the information given to the lender. It is, therefore, an approximation which can be less or more when the official application for the loan is submitted.

As stated in the question, getting a prequalification helps Matt to identify and understand the areas of problems and credit report errors that may arise and then he can use the prequalification information to attend to these errors and ensure a proper application is submitted that will allow him to maximise the amount of loan that can be made available to him.

Once Matt has corrected errors and identified problems that may arise on his mortgage application, he then gathers the relevant document and goes for the first formal process in mortgage processing which is the preapproval.

6 0
3 years ago
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$8,000,000 - corporate issued
5 % -  annual interest
30 % - income tax rate
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