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SSSSS [86.1K]
3 years ago
11

QUESTION 32 Eccles Inccorporated Eccles Incorporated, a zero growth firm, has an expected EBIT of $100,000 and a corporate tax r

ate of 25%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. Refer to the data for Eccles Incorporated. What is the firm's cost of equity according to MM with corporate taxes
Business
1 answer:
cricket20 [7]3 years ago
7 0

Answer:

The cost of equity is 32%

Explanation:

The formula for calculating firm's cost of equity according Miller and Modgiliani is given as:

r levered=r unlevered+(debt/equity*(r unlevered -cost of debt)*(1-tax)

r unlevered is the cost of an unlevered equity=16%

debt=$500000

cost of debt=12%

equity=unknown

Hence we need to first of all calculate the total value of the firm and the formula is

EBIT(1-tax)/unlevered cost of equity+(debt*tax)

$100000(1-0.25)/16%+($500000*25%)=$593750

r levered=16%+($500000/($593750-$500000)*(16%-12%)*(1-0.25)

r levered=0.32 that is 32%

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Zanzabum

Answer:

D) Project importance is enhanced by setting authority equal to that of functional departments.

Explanation:

A matrix organization is characterized by, multiple command system and overlapping of command, control and behavioral pattern.

Here, temporary project groups are created so as to handle short term projects. Personnel are drawn from functional department and their activities are controlled and coordinated by a project manager.

Once a project is completed, the structure is disbanded and the personnel return to their original departments i.e functional department.

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Under matrix structure for project management, the project manager is not allowed to use resources exclusively for the project i.e like in project management. Rather, such a manager is required to share resources with the organization.

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2 years ago
ChocolateCookie Inc is a private firm. You collected information about its competitors and calculated the weighted average of th
kvv77 [185]

Answer:

1.25

Explanation:

The Capital Asset Pricing model will be used

ße = ßa × [Ve + Vd(1 – T)] / Ve

Here

ße = 1.08

Ve = Value of equity $50 million

Vd = Value of debt $10 million

T is tax rate which is 21%.

By putting the values, we have:

ße = 1.08 × [50 + 10(1 – 21%)] / 50

ße = 1.25

The beta equity of Chocolate Cookie is 1.25 which shows higher risk than average risk.

8 0
2 years ago
a client undergoes personalility changes and has difficulty with voluntary activities. the client is diagnosed with a brain tumo
Shalnov [3]

Answer:

3. Frontal Lobe

Explanation:

Based on the information provided within the question it can be said that in this scenario the client is diagnosed with brain tumor which the nurse indicates as being located in the Frontal Lobe. The nurse knows this immediately due to the fact that the Frontal Lobe is the part of the brain that concerns personality, behavior, emotions, and intellectual function. Since the client has undergone personality changes then it can be deduced that the tumor is located in the Frontal Lobe.

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3 years ago
An investment banker has recommended aâ $100,000 portfolio containing assetsâ B, D, and F.â $20,000 will be invested in assetâ B
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β = 1.45

Explanation:

The beta of the portfolio is defined as an average of the betas (β) of each asset within the portfolio weighted by their respective invested amounts (A):

A_{P}* \beta_{P} =A_{B}* \beta_{B} +A_{D}* \beta_{D} +A_{F}* \beta_{F} \\\beta_{P} =\frac{20,000 * 1.5 + 50,000*2.0 +30,000*0.5}{100,000}\\\beta_{P} = 1.45

The beta of the portfolio is 1.45

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3 years ago
You are the newly appointed sales manager of the Rock Record Company and have been charged with the task of increasing revenues.
djyliett [7]

Answer:

increase the price of our products or services.

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When the price elasticity is less than 1 (inelastic), then an increase in the price of our products or services will result in a proportionally smaller decrease in the quantity demanded. Therefore, by increasing our prices, we can increase total revenue even if the quantity demanded decreases a little.

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