Answer:
b. diminishing returns to specialization.
Explanation:
Diminishing returns is also called diminishing productivity. It states that as additional unit of input is used in production it will get to a stage where more of input will be required to maintain output levels.
If the same level of input is used it will result in reduction in output over time.
This is exemplified in this secanrio where it takes 10 units of resources to increase its output of sugar from 12 tons to 13 tons, but 11 units of resources to increase output from 13 tons to 14 tons, and 12 units of resources to increase output from 14 tons and 15 tons.
It takes more input to increase output by 1 ton
Answer:
3.60
Explanation:
Given that,
Sales units = 1,000
Sales price per unit = $60
Variable expenses = 40% of the selling price
Total Fixed cost = $26,000
Contribution margin per unit:
= Selling price - Variable cost
= $60 - ($60 × 40%)
= $60 - $24
= $36
Total contribution:
= Contribution margin per unit × Sales units
= $36 × 1,000
= $36,000
Profit = Total contribution - Fixed cost
= $36,000 - $26,000
= $10,000
Degree of operating leverage:
= (Sales - Variable costs) ÷ (Sales - Variable costs - Fixed Expenses)
= (60,000 - 24,000) ÷ (60,000 - 24,000 - 26,000)
= 36,000 ÷ 10,000
= 3.60
Answer:
New Beta = 1,17
Explanation:
Portfolio # Beta NEW Beta
$ 5.000 1 1,00 2,00
$ 5.000 2 1,12 1,12
$ 5.000 3 1,12 1,12
$ 5.000 4 1,12 1,12
$ 5.000 5 1,12 1,12
$ 5.000 6 1,12 1,12
$ 5.000 7 1,12 1,12
$ 5.000 8 1,12 1,12
$ 5.000 9 1,12 1,12
$ 5.000 10 1,12 1,12
$ 5.000 11 1,12 1,12
$ 5.000 12 1,12 1,12
$ 5.000 13 1,12 1,12
$ 5.000 14 1,12 1,12
$ 5.000 15 1,12 1,12
$ 5.000 16 1,12 1,12
$ 5.000 17 1,12 1,12
$ 5.000 18 1,12 1,12
$ 5.000 19 1,12 1,12
$ 5.000 20 1,24 1,24
$ 100.000 1,12 1,17
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Answer and Explanation:
The computation is shown below:
a. Marpor's value without leverage is
But before that first we have to calculate the required rate of return which is
The Required rate of return = Risk Free rate of return + Beta × market risk premium
= 5% + 1.1 × (15% - 5%)
= 16%
Now without leverage is
= Free cash flows generates ÷ required rate of return
= $16,000,000 ÷ 16%
= $100,000,000
b. And, with the new leverage is
= (Free cash flows with debt ÷ required rate of return) + (Tax rate × increase of debt)
= ($15,000,000 ÷ 0.16) + (0.35 × $40,000,000)
= $93,750,000 + $14,000,000
= $107,750,000