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
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

You might be interested in
What shows the quantities of products demanded at each price by all consumers in a market?
e-lub [12.9K]
A market demand schedule
5 0
3 years ago
Read 2 more answers
discuss the influences of supply and demand in your daily life. describe one good and one service you use daily, and describe th
tester [92]

Answer:

I use coffee daily. The supply for the coffee I bought (Colombian Coffee) is few then the price is expensive.  As the price is expensive I can only buy 2 pounds of this item per month. My demand is affected for the price that producers set to this coffee. I would like to buy more but then the supply of this product is limited therefore the prices will always be high.

7 0
2 years ago
A real estate loan where a homeowner receives monthly payments based on accumulated equity rather than a lump sum and is repaid
ivanzaharov [21]

Answer:

reverse annuity mortgage

Explanation:

The term that is being described is known as a reverse annuity mortgage. Like defined in the question, this is a loan that allows you to cash in some of your home's equity without actually needing to sell the entire real estate property and move out of your home. Instead the loan is secured against the value of your home and monthly payments are paid to the owner that asked for the loan.

6 0
3 years ago
Policy involves government changes to spending or taxation to affect the economy.
Katarina [22]

Fiscal policy involves government changes to spending or taxation to affect the economy.

<h3>What is meant by fiscal policy?</h3>

This is the use of government tools such as taxes or expenditure in the stimulation of a given economy. The use of fiscal tools could be either for a contractionary government policy or it could be expansionary in nature.

Contractionary means the raise in taxes and the decrease in government spending. The expansionary policy is the opposite of this. Hence we have to say that Fiscal policy involves government changes to spending or taxation to affect the economy.

Read more on Fiscal policy here:  brainly.com/question/6583917

#SPJ1

6 0
2 years ago
Following a phone call addressing a customer problem, what should you do? O Remove the customer from your mailing list. O Report
kakasveta [241]

Answer:  Follow up with a letter that documents the call and promotes goodwill.

                                         

Explanation: The given case, belongs to the public relations concept under which the company tries to interact better with their customers, so that the customers enjoy a healthy experience and the image of the company remains positive.

The proper way to address a complaint call is to follow up by giving a letter stating the explanation apologies, excuses shall not be mentioned and assurance should be provided that such action would not be taken in future.

                 

7 0
3 years ago
Other questions:
  • Marin Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 8 years and requires equa
    9·1 answer
  • Gerald’s manufacturing firm sold goods worth $6,000 to some customers on credit in the month of January. His customers plan to p
    14·1 answer
  • Who is the register general of c.a.c​
    9·1 answer
  • Which of the following perspectives is least useful for evaluating solutions?
    11·2 answers
  • The laser printer in your accounting department is printing faded prints that are getting lighter over time. What is the most li
    6·1 answer
  • The use of teams is becoming increasingly prevalent in the U.S. workplace, partly because of the many benefits associated with t
    7·1 answer
  • Melissa's tugboat accidentally collides with Tyler's yacht, and Tyler sues Melissa for negligence. A federal jury finds Melissa
    9·1 answer
  • Jimmy corporation uses the weighted-average method in its process costing system. the ending work in process inventory consists
    13·1 answer
  • g A speculator buys a call option for $3, with an exercise price of $50. The stock is currently priced at $49, and rises to $55
    8·1 answer
  • What is economic system ?​
    11·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!