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svet-max [94.6K]
4 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]4 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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if at the beginning of 1925 you had incested 10,000 in a portfolio of small-company stocks and rolled over your investment every
inn [45]

Answer:

Rate of return is 2.52%

Explanation:

Investment in 1925 = $10,000

Portfolio value in 2000 = $64,402.23

Number of years = 2000-1925 = 75 years

Rate of return = ?

Using following formula to calculate rate of return.

A = P x ( 1 + r )^n

64,402.23 = 10,000 x ( 1 + r )^75

64,402.23 / 10,000 = ( 1 + r )^75

6.440223 =  ( 1 + r )^75

\sqrt[75]{6.440223} = \sqrt[75]{(1+ r)^75}

1.02515 = 1 + r

r = 1.02515 - 1

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EEE Corp. reports the following information for the fiscal year. (in $ million) Revenue $7,015 Expenses $3,890 Beginning retaine
Naily [24]

Answer:

See below

Explanation:

First we will compute the ending retained earnings

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3 years ago
The Artisan Cheese Company in Florida has decided to add a new line of imported cheeses to its offering. The company president (
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Explanation:

First, let us define what Marketing Mix is:

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The goal of a marketing strategy is to create awareness among the target audience.

Feedback and surveys are ways in which a company informs its marketing mix strategy. Therefore, if it has been determined from the customer feedback from company surveys and cheese tasting that the Product the customers prefer is Cheese from England, then that is what should be produced and promoted.

It cannot be over emphasized that companies are in business because of the customers, so their opinion takes precedence, as the saying goes, customer is always right. Therefore, if the need of the customer is not met, the company will make no profits.

The company president and product director will have to do what the customer wants.

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