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algol [13]
3 years ago
6

The owners of a corporation are the __________ (shareholders of the company, board of directors, or management team members). Th

e primary goal of the corporate management team is to (minimize or maximize) the shareholder's wealth by __________ (minimizing or maximizing) the company's (employee retention and efficiency, company's stock price, or company's production costs) over the long run.
Business
1 answer:
mario62 [17]3 years ago
6 0

Answer :

The owners of a corporation are the __________ (shareholders of the company, board of directors, or management team members). The primary goal of the corporate management team is to (minimize or maximize) the shareholder's wealth by __________ (minimizing or maximizing) the company's (employee retention and efficiency, company's stock price, or company's production costs) over the long run.

Explanation :

Shareholders are the primary owners of the company who have company's common stock with expectation on their investment in form of dividends and share appreciation.

The primary goal of the corporate management team is to maximize the wealth of their principal (shareholders) who have entrusted them with their fortunes .

Shareholders' wealth maximization objective is achieved when management team invest in a viable project or reduce the operating costs of the company.

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choli [55]

solution to the question is in attached image.

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3 years ago
You must evaluate a proposed spectrometer for the R&D department. The base price is $190,000, and it would cost another $47,
kolbaska11 [484]

Answer:

See the explanation for the answers.

Explanation:

(a)

                                                     Year

                                        0                      1                   2             3

Cost of Equipment=   237500              0                   0            0

Base price +

Modification

Cost

Working Capital          13000             0                 0           -1300

Saving in                        0               57000         57000      57000

Labor Cost

Depreciation(%)            0              33%               45%            15%

Depreciation                 0             78375           106875      35625

.Book Value            237500       159125           52250         16625

.Salvage Value            0                  0                  0               57000

.After Tax                     0                  0                  0               40850

Salvage Value  

.Cash Flow           -250500         65550         76950         102300

.Discounted Cash -250500     57500          59210.5    69049.59

Flow at 14%  

NET VALUE                -64739.89            

(a)

Initial Investment / Cash Flow in year 0   = Cost of Equipment + Increase in working capital

                               = 237500 + 13000

                               =$250,500

Cash Flows in Years 1 and 2   = (Saving in Labor Cost - Depreciation) * (1 - Tax Rate) +  Depreciation

Cash Flow in year 3   = (Saving in Labor Cost - Depreciation) * (1 - Tax Rate) + Depreciation + Recovery of Working Capital + After Tax Salvage Value

After Tax Salvage Value = Salvage Value - (Salvage Value - Book Value) * Tax Rate

                                        = 57000 - (57000 - 16625) * 0.4

                                       = $40,850

(b)

Year       Cash Flow

1         $65550

2         $76950

3         $102300

(c)

If WACC is 14%, the net present value of the project is -$64,739.89. Since NPV is negative, the barometer should not be purchased.

5 0
3 years ago
Lawrence needs to respond to a coworker's email. In a plain text email,the coworker has asked Lawrence a number of questions.Law
Gwar [14]

The color of the text

Hope this helps :)

6 0
3 years ago
Read 2 more answers
The fed plans to raise the discount rate to 6%. this indicates that:
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Recording classifying summarizing and interpreting financial events and transactions is the definition of Accounting
6 0
3 years ago
Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery ba
Alexus [3.1K]

Answer:

Consider the following calculation

Explanation:

a.) What is the best estimate of the after tax cost of debt ?

Coupon rate 7.25%.

Periods/year 2.

SO PMT = 7.25%*1000/2 = 36.25 Maturity (yr) 20. SO nper = 20*2 =40 Bond price 875 Par value 1000 Tax rate 40% So Annual Yield =2*Rate(nper, pmt,pv,fv) = 2*Rate(40,36.25,-875,1000) = 8.57% SO After-tax cost of debt for use in WACC = rd(1 ? T) = 5.14% ...

Ans (a) (b) based on the CAPM, what is the firms cost of equity? We have P0=15.25, beta=1.25, Krf = Treasuy bill = 5.50%, Ks =11.5% RPm = Exp Mkt return = Krf = Ks-Krf = 11.5%-5.5% = 6% SO CAPM COst of Equity rs = Krf + RPm*Beta ie rs= 5.5% + 6%*1.25 = 13.00%

(c) Weighted WACC Bond Price = 875, No of Bonds = 40,000 So MV of Debt = D = 875*40000 = $35,000,000 Stock price = 15.25, No of shares = 10,000,000 So MV of Equity = E= 152,500,000 Total MV = D+E = 187500,000 SO Weighted Debt = Wd = D/Total MV = 35,000,000/187,500,000 = 18.67% Weighted equity We = E/Total MV = 152500000/187500000 = 81.33% SO WACC = Wd*(1-T)*rd + We*rs = 18.67%*(1-40%)*8.57% + 81.33%*13% ie WACC = 11.53%\)

8 0
3 years ago
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