Answer:
It is <u>safer</u> for a company to issue equity than debt
It is <u>riskier</u> for an investor to buy equity in a company than debt in the same firm
Explanation:
If company issues debt that it has to make fixed interest payments, thus even if company is making losses, it has to pay interest which is not in case of equity. Hence, it is riskier option for the company to raise debt.
On the other, if investor in debt, then he will get fixed interest, thus debt option is relatively cheap than equity for investor
Answer:
$20.
Explanation:
As the question require us to calculate the profit when one unit in excess of break-even point is sold, so we have to calculate the break-even quantity first. The formula to calculate the break-even quantity is:
Break-even Units = Fixed Cost / (Contribution Margin Per Unit)
where
Contribution margin per unit = Selling price per unit - variable cost per unit
⇒ Break-even units = 15 / (50 - 30) = .75.
This makes the one unit in excess of break-even volume to be 1.75. Now, we have to draft the income statement to determine the operating profit when sales volume is 1.75.
Income Statement
Revenue (50 * 1.75) $87.5
Variable Cost (30 * 1.75) (52.5)
Fixed Cost (15)
Operating Profit $20
Answer:
2011 Value of investment in Mayfair
= Beginning investment value + Portion of Mayfair net income - Portion of Mayfair dividends
= 5,700,000 + (40% * 2,250,000) - (300,000 shares * 0.15)
= $6,555,000
2012 Value of investment
= Beginning investment value + Portion of Mayfair net income - Portion of Mayfair dividends
= 6,555,000 + (40% * -180,000) - (300,000 * 0.15)
= $6,438,000
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Just need one more sorry
