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svet-max [94.6K]
3 years ago
10

Tropical Fruit Extracts expects its earnings before interest and taxes to be $218,000 a year forever. Currently, the firm has no

debt. The cost of equity is 16.3 percent and the tax rate is 35 percent. The company is in the process of issuing $2 million of bonds at par that carry a 6.5 percent annual coupon. What is the unlevered value of the firm
Business
1 answer:
katen-ka-za [31]3 years ago
3 0

Answer:

The unlevered value of the firm is $869325.15

Explanation:

For computing the value of unlevered firm, the following formula should be used which is shown below:

Value of levered firm = Earning before interest and taxes × (1 - tax rate) ÷ cost of equity

where,

Earnings before income and taxes are $218,000

Cost of equity is 16.3%

And, the tax rate is 35%

Now put these values on the above formula

So, the value would be equals to

= $218,000 × (1 - 0.35) ÷ 16.3%

= $141,700 ÷ 16.3%

= $869325.15

The other terms like bonds and the annual coupon should not be considered in the computation part because we have to calculate for unlevered firm which only includes equity and the bond is a debt security. Thus, it is irrelevant.

Hence,  the unlevered value of the firm is $869325.15

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2 years ago
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Sedbober [7]

Answer:

Variable cost per unit= $1.5

Fixed costs= $2,000

Explanation:

Giving the following information:

Miles Driven Total Cost

January 10,000 $17,000

February 8,000 13,500

March 9,000 14,400

April 7,000 12,500

<u>To calculate the variable and fixed costs under the high-low method, we need to use the following formula:</u>

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (17,000 - 12,500) / (10,000 - 7,000)

Variable cost per unit= $1.5

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 17,000 - (1.5*10,000)

Fixed costs= $2,000

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 12,500 - (1.5*7,000)

Fixed costs= $2,000

5 0
3 years ago
Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hour
OLEGan [10]

Answer:

The inspecting costs should be allocated to the Basic model using ABC costing is $30,600

Explanation:

The computation of the inspecting cost is shown below:

= Total number of basic model inspection + the total number of inspection

where,

Total number of basic model inspection equals to

= Number of units produced ÷ every units produced

= 3,400 units ÷ 100

= $34

And, the total number of inspection equals to

= Total inspection cost ÷ number of inspection

= $84,600 ÷ $94

= 900

The number of inspection includes

= total number of basic model inspection + the total number of luxury model inspection

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Now put these values to the above formula  

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The law of demand posits that people will demand more of a good when the price is lower as opposed to when it is higher. This is why Pat will want to buy more candy bars when the price is lower at $1 as opposed to $2.

The demand curve will shift when there is a change in one of the determinant of demand such as the income of people and the price of substitutes.

Find out more on the law of demand at brainly.com/question/24500422

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goldenfox [79]

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When applied to specific individuals, these generalizations about groups of people may be accurate, but they may also be incorrect, which is one of the causes of prejudice.

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brainly.com/question/13281670

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6 0
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