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mars1129 [50]
3 years ago
9

DAR Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under P

lan I, the company would have 160,000 shares of stock outstanding. Under Plan II, there would be 110,000 shares of stock outstanding and $1.41 million in debt outstanding. The interest rate on the debt is 7 percent and there are no taxes. Use M&M Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $ per share What is the value of the firm under each of the two proposed plans? (Do not round intermediate calculations and round your answers to the nearest whole dollar amount, e.g., 32.)
Business
1 answer:
Eddi Din [679]3 years ago
6 0

Answer:

a) Share price of company is $28.20.

b) So value of unlevered firm is $4.512 million.

Explanation:

a.

Share price = Value of debt / (160,000 - 110,000)

= $1,410,000 / 50,000

= $28.20

Share price of company is $28.20.

b.

VAlue of all equity firm = Number of share outstanding × Price per share

= 160,000 × $28.20

= $4.512 million

Value of levered firm is $4.512 million.

Since tax rate is zero, so value of levered firm equal to value of unlevered firm.

So value of unlevered firm is $4.512 million.

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DochEvi [55]

Answer:

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5 0
2 years ago
Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Rela
klasskru [66]

Solution :

We calculate the advances form the customer to be reported as the current liability as on Dec. 31, 2009 in the balance sheet as follows :

          <u>  Particulars  </u>                                                               <u>  Amount ($)</u>

Customer advances the balance Dec 31, 2008                           110

Add : advances that is  received with 2009 orders is                 195

Less : advances applicable to the orders in 2009                      -180

Less : advances from orders that are canceled in 2009          <u>  -45  </u>

Advances from the customers liability Dec. 31, 2009                  80

Therefore, the advance from the customer to be reported in the balance sheet as the current liability is $80.

6 0
2 years ago
Production data for Joe's Pizza Parlor are as follows. For simplicity assume that labor is the only input. Each pizza sells for
Novay_Z [31]

Answer:

Joe's Pizza Parlor

The highest number of workers that Joe will hire if he must pay each one $35 a day is

4 workers.

If he wants to maximize his profits without satisfying customers' demand, Joe can choose to work with 2 or 3 workers.  However, he can renegotiate the worker's wages downwards.

Explanation:

a) Data and Calculations:

Price of pizza = $5

Wage per worker = $35/day

Number of Workers         0     1      2      3        4       5

Pizzas Baked Per Day      0    12   18     24     30     32

Total revenue                   0   60  90   120    150    160

Marginal revenue             0   60  30    30      30      10

Marginal cost of labor      0    35  70   105    140    175

Profit                                 0    25  20     15      10     -15

 

7 0
3 years ago
Here are incomplete financial statements for BLOSSOM, Inc. Calculate the missing amounts
Otrada [13]

Answer:

(A) net income: 20,000

(B) COGS = 55,000

(C) Common Stock = 30,000

Explanation:

(A) with the RE statemtn we sovle for RE

net income = ending RE - beginning RE + dividends

net income = 27,000 - 12,000 + 5,000 = 20,000

(B) With the net income we solve for COGS

COGS= revenues - net income - salaries and wages

COGS = 85,000 - 20,000 - 10,000 = 55,000

(C) now we solve for common stock

liab + equity = total liab and stockholders equity

account payable + common stock + RE = total liab and stockholders equity

5,000 + CS + 27,000 = 62,000

CS = 62,000 - 27,000 - 5,000 = 30,000

5 0
3 years ago
You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a chec
Hoochie [10]

Answer:

Option E                  

Explanation:

A direct transfer refers to the shift of funds from certain form or section of a tax deferred retirement savings plan to another. Direct payments are not deemed to be statutory dividends, and are therefore not taxed as profits or susceptible to premature payment charges. Now normally this form of transition happens digitally.

In simple terms, cash loans exist when a company sells its shares in return for money specifically to the savers. There is no financial institution involved in this procedure. Small firms typically use direct transfers, so very less money is generated during this phase.

6 0
3 years ago
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