Answer:
a. What is the value today of Steinberg's debt and equity?
b. What is the value today of Dietrich's debt and equity?
c. Steinberg’s CEO recently stated that Steinberg’s value should be higher than Dietrich’s because the company has less debt and therefore less bankruptcy risk. Do you agree or disagree with this statement?
- A. Disagree: a company's value is determined by by its operating income (EBIT), not by there capital structure (M&M theory).
Explanation:
economic expansion 80% chance, EBIT $3.5 million
economic recession 20% chance, EBIT $1.9 million
expected EBIT = (3.5 x 0.8) + (1.9 x 0.2) = $2.8 million + $0.38 million = $3.18 million
Steinberg's debt obligations $980,000 at the end of next year
Dietrich's debt obligations $2,000,000 at the end of next year
total company value = $3.18 million / (1 + 10%) = $2,890,909
Answer:
Q = 10 - 0.1p
Explanation:
Given that,
Demand equation for good 'x':
Q = 9 - 0.1p - p_y + 0.01p_z + 0.0005Y
Where,
p = own price of the good
Q = quantity demanded
p_y = price of a related good = $3
p_z = price of a different related good = $200
Y = consumer income = $4,000/month
Therefore, the quantity demanded as a function of the price can be written as follows;
Q = 9 - 0.1p - p_y + 0.01p_z + 0.0005Y
Q = 9 - 0.1p - 3 + 0.01(200) + 0.0005(4,000)
Q = 6 - 0.1p + 2 + 2
Q = 10 - 0.1p
The correct designing principles that will be implemented to create the brochure will be Contrast and Repetition.
In the question, it is stated that a brochure has to be made for the business. The brochure will be designed such that the text will be in black color, the section headings will be blue, etc. In order to create such a brochure, the Designing principles will include Contrast and Repetition.
Contrasting and Repetition are based on making people visualize and highlight the key points of the brochure. It is basically based upon creating a contrasting difference between and highlighting the important key points in the brochure.
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Answer:
C expense meaning cost money
