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ValentinkaMS [17]
3 years ago
10

Ornaments, Inc., is an all-equity firm with a total market value of $608,000 and 27,300 shares of stock outstanding. Management

believes the earnings before interest and taxes (EBIT) will be $86,600 if the economy is normal. If there is a recession, EBIT will be 25 percent lower, and if there is a boom, EBIT will be 35 percent higher. The tax rate is 35 percent. What is the EPS in a recession
Business
1 answer:
Stels [109]3 years ago
3 0

Answer:

The EPS in recession is $1.546 per share.

Explanation:

The earnings per share or EPS is a function of net income divided by the number of shares outstanding. The earnings per share calculates the dollar return per share that is earned in a year.

Earnings per share = Net Income / No of common shares outstanding

Where, Net Income = EBIT - Interest - Tax

The EBIT in recession will be = 86600 * (1-0.25) = $64950

The company is all equity financed so there is no interest cost.

Net Income in recession will be = 64950 - (64950 * 35%)  =  $42217.5

Thus, EPS in recession = 42217.5 / 27300  =  $1.546 per share

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The risk-free rate of return is 2% and the expected return on the market portfolio is 8%. Oklahoma Oilco has a beta of 2.0 and a
solmaris [256]

Answer:

The multiple choices are as follows:

18.6%

14.0%

22.8%

25.0%

The second option is the correct answer,14%

Explanation:

The capital asset pricing asset model formula for computing a firm's cost of equity according to Miller and Modgiliani is given below:

Ke=Rf+Beta*(Mr-Rf)

Rf is the risk free of 2% which is the return expected from zero risk investment such as government treasury bills.

Beta is how risky an investment in a company is compared to similar businesses operating in similar business sector of the company given as 2.0

Mr is the expected return on market portfolio which 8%

Ke=2%+2*(8%-2%)

Ke=2%+2*(6%)

Ke=2%+12%=14%

3 0
3 years ago
The financial services department of your company offers a competitive leadership program. After screening and interviewing all
zmey [24]

Answer:

The correct answer is: Formal.  

Explanation:

<em>Leadership programs</em> within companies are provided to prospective employees who have the potential of following a managerial path career within the organization. They are possibly already seen as leaders within their departments but the training could help them whether to polish some of their skills or to learn how to better lead.  

Thus, invitation letters to the participants of leadership programs should be written following a <em>formal </em>coding.

5 0
3 years ago
if you do not pay the entire credit card bill you are charged a FLAT FEE or an INTEREST on the unpaid part?
Soloha48 [4]
You are charged with flat fee
7 0
4 years ago
Problems and Applications Q2 Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per
kari74 [83]

Answer:

$550,000

Explanation:

Based on the information given the OPPORTUNITY COST OF RUNNING THE HARDWARE STORE will be $550,000 ($500,000+$50,000), which include the amount of $500,000 which is the cost of renting the store as well as to the cost to buy the stock while the $50,000 is her salary as an Accountant, reason been that she would QUIT HER JOB as an accountant in order for her to run the store.

Therefore the OPPORTUNITY COST will be $550,000

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3 years ago
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Ganezh [65]

Answer: Justin's sponsoring broker

Explanation:

From the question, we are informed that Justin, a real estate salesperson with City Brokerage, received a referral fee when he refered a client to Mark, who is another real estate salesperson with City Brokerage.

The person to pay Justin his referral fee will be Justin's sponsoring broker. It should be noted that when another agents gets a referral from an agent, the sponsoring broker is the one who gives the referral fee to the referring agent.

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