1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Mashutka [201]
3 years ago
10

"Dream, Inc., has debt outstanding with a face value of $4 million. The value of the firm if it were entirely financed by equity

would be $18.6 million. The company also has 510,000 shares of stock outstanding that sell at a price of $31 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs
Business
1 answer:
Artist 52 [7]3 years ago
7 0

Answer:

expected bankruptcy costs =  $190000

Explanation:

given data

face value = $4 million

equity = $18.6 million

stock outstanding = 510000 shares

sell price = $31 per share

corporate tax rate = 35 percent

to find out

decrease in the value of the company due to expected bankruptcy costs

solution

we get here value of levered firmed by M & M proportion

value of levered firm = value of equity + value of debit

value of levered firm = $18.6 million + 35% ( $4 million)

value of levered firm = $20 million

and

now we get total market value of firm that is

total market value of firm = market value of equity + market value of debit

total market value of firm = $31 ( 510000 ) +  $4 million

total market value of firm = $19810000

so expected bankruptcy costs are here as

expected bankruptcy costs =  $20 million - $19810000

expected bankruptcy costs =  $190000

You might be interested in
How are manufacturers trying to reverse or counteract the negative environmental impacts of manufacturing? (Select all that appl
zzz [600]

The manufacturers are trying to counteract the negative environmental impacts of manufacturing by:

  • reducing and eliminating waste
  • establishing green initiatives

<h3>How does manufacturing affect the environment?</h3>

The emission of carbon and waste from the manufacturing plant plays a part in the concentration of greenhouse gases on earth.

However, the manufacturers are adopting the process of reducing & eliminating waste and establishing green initiatives to minimize its pollution of the environment.

Therefore, the Option B and E is correct.

Read more about environmental impact

<em>brainly.com/question/27080910</em>

8 0
2 years ago
Economics can be described as the study of how people use ________ resources to satisfy ________ wants.A) unlimited; unlimitedB)
Masteriza [31]

Answer:

C) limited; unlimited

Explanation:

Economics can be described as the study of how people use limited resources to satisfy unlimited wants.

5 0
3 years ago
Bond ratings are significantly based on all of the following EXCEPT:_______.
KiRa [710]

Answer:

c) The current ratio

Explanation:

The current ratio is an example of a liquidity ratio.

Liquidity ratios measure a company's ability to meet its short term obligations.

Current ratio = curernt assets / current liabilities

Return on assets is a profitability ratio. It measures return on investment

The other ratios are coverage ratios. They measure the ability of the firm to covert its debts payments

5 0
2 years ago
Strait Co. manufactures office furniture. During the most productive month of the year, 3,300 desks were manufactured at a total
Elza [17]

Answer:

Using the high-low method of cost estimation, total fixed costs are $47,020  

Explanation:

Cost at highest level of activity = $82,000.00

Cost at Lowest level of activity = $59,000.00

Highest level of activity = 3,300

Lowest Level of activity = 1,130

Variable cost per unit = $(82,000 - 59,000) ÷ (3,300 -1,130)  

Variable cost per unit = $23,000 ÷ 2,170  

Variable cost per unit = $10.60  

Fixed Costs = $82,000 - (3,300 × 10.60)  

Fixed Costs = $47,020  

6 0
3 years ago
On October 15, 2018, Jon purchased and placed in service a used car. The purchase price was $25,000. This was the only business
Anika [276]

Answer: Total deduction= $2,528

Explanation:

25000*0.2*0.8=4,000  

Auto maximum = $3,160

Total deduction = 3,160*0.8

Total deduction= $2,528

5 0
2 years ago
Other questions:
  • Which of the following items below would be covered by a standard renters insurance policy?
    11·1 answer
  • Maybelline falls down a well and is saved when her neighbor Ruben makes a very daring rescue. Ruben hoists her to safety, and Ma
    15·1 answer
  • Describe the four goals of human resource management with examples and explanation of what is meant by the goal.
    9·1 answer
  • On January 1, 2024, Fabrikam Labs issued 1,000 bonds, each with a face value of $1,000, for 102.7323. The stated interest is 3.8
    15·1 answer
  • Jeep recognizes that it has some customers who like roomy suvs, while others like more compact versions. it also has customers w
    8·1 answer
  • Identify the self-assessment test that each statement describes.
    6·2 answers
  • Francois pays a lot of attention to the environment outside his company, staying alert for long-run opportunities and problems a
    13·1 answer
  • ABC Retail stocks and sells its own brand of personal computers. It costs the firm $600 each time it places an order with a manu
    9·1 answer
  • Use this information for ABC Corporation to answer the question that follow. ABC Corporation has three service departments with
    10·1 answer
  • A professional identity or brand name used by a salesperson and at least one or more other licensees, to provide real estate lic
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!