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hoa [83]
3 years ago
8

The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, t

hen the greater the amount of capital in use the _________. a. less production is wasted. b. less is produced. c. the more an additional unit of capital adds to production. d. the less an additional unit of capital adds to production.
Business
1 answer:
Volgvan3 years ago
5 0

Answer:

b. Less is produced

Explanation:

The Principle of diminishing returns to capital states that as more unit of capital is  added, a point will be reached where a decline in the marginal product will be encountered.

This simply means that for every additional unit of capital invested in the business, a less than proportionate increase is seen, this simply means that there will be a decrease in marginal productivity.

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Kaelea, Inc., has no debt outstanding and a total market value of $81,000. Earnings before interest and taxes, EBIT, are project
son4ous [18]

Answer:

a. We have:

EPS under normal = $1.09 per share

EPS under expansion = $1.34 per share

EPS under recession = $0.74 per share

b. We have:

Percentage changes in EPS when the economy expands = 23%

Percentage changes in EPS when the economy enters recession = –32%

c. We have:

EPS under normal after recapitalization = $1.24

EPS under expansion after recapitalization = $1.59 per share

EPS under recession after recapitalization = $0.75 per share

d. We have:

Percentage changes in EPS after recapitalization when the economy expands = 28.23%

Percentage changes in EPS when the economy enters recession = –39.52%

Explanation:

a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.

Shares outstanding = 5,400

Net income under normal = EBIT under normal - (EBIT under normal * Tax rate) = $9,800 - ($9,800 * 40%) = $5,880

EPS under normal = Net income under normal / Shares outstanding = $5,880 / 5,400 = $1.09 per share

Net income under expansion = (EBIT under normal * (100% + Percentage increase in EBIT)) - ((EBIT under normal * (100% + Percentage increase in EBIT)) * Tax rate) = ($9,800 * (100% + 23%)) – (($9,800 * (100% + 23%))* 40%) = $7,232.40

EPS under expansion = Net income under expansion / Shares outstanding = $7,232.40 / 5,400 = $1.34 per share

Net income under recession = (EBIT under normal * (100% - Percentage decrease in EBIT)) - ((EBIT under normal * (100% - Percentage decrease in EBIT)) * Tax rate) = ($9,800 * (100% - 32%)) – (($9,800 * (100% - 32%))* 40%) = $3,998.40

EPS under recession = Net income under recession / Shares outstanding = $3,998.40 / 5,400 = $0.74 per share

b. Calculate the percentage changes in EPS when the economy expands or enters a recession.

Percentage changes in EPS when the economy expands = ((EPS under expansion - EPS under normal) / EPS under normal) * 100 = (($1.34 - $1.09) / $1.09) * 100 = 23%

Percentage changes in EPS when the economy enters recession = ((EPS under recession - EPS under normal) / EPS under normal) * 100 = (($0.74 - $1.09) / $1.09) * 100 = –32%

c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.

Market price per share = Total market value / Shares outstanding before recapitalization = $81,000 / 5,400 = $15

Number of shares to repurchase = Debt amount / Market price per share = $23,100 / $15 = 1,540

Shares outstanding after recapitalization = Shares outstanding before recapitalization - Number of shares to repurchase = 5,400 – 1,540 = 3,860

Interest on debt = Debt amount * Interest rate = $23,100 * 8% = $1,848

Net income under normal after recapitalization = EBIT under normal – Interest on debt - ((EBIT under normal – Interest on debt) * Tax rate) = $9,800 - $1,848 - (($9,800 - $1,848) * 40%) = $4,771.20

EPS under normal after recapitalization = Net income under normal after recapitalization / Shares outstanding after recapitalization = $4,771.20 / 3,860 = $1.24

EBIT under expansion = EBIT under normal * (100% + Percentage increase in EBIT) = ($9,800 * (100% + 23%)) = $12,054

Net income under expansion after recapitalization = EBIT under expansion – Interest on debt – ((EBIT under expansion – Interest on debt) * Tax rate) = $12,054 - $1,848 - (($12,054 - $1,848) * 40%) = $6,123.60

EPS under expansion after recapitalization = Net income under expansion after recapitalization / Shares outstanding after recapitalization = $6,123.60 / 3,860 = $1.59 per share

EBIT under recession = EBIT under normal * (100% - Percentage decrease in EBIT) = ($9,800 * (100% - 32%)) = $6,664

Net income under recession after recapitalization = EBIT under recession – Interest on debt – ((EBIT under recession – Interest on debt) * Tax rate) = $6,664 - $1,848 - (($6,664 - $1,848) * 40%) = $2,889.60

EPS under recession after recapitalization = Net income under recession after recapitalization / Shares outstanding after recapitalization = $2,889.60 / 3,860 = $0.75 per share

d. Calculate the percentage changes in EPS when the economy expands or enters a recession.

Percentage changes in EPS after recapitalization when the economy expands = ((EPS under expansion after recapitalization - EPS under normal after recapitalization) / EPS under normal after recapitalization) * 100 = (($1.59 - $1.24) / $1.24) * 100 = 28.2%

Percentage changes in EPS when the economy enters recession = ((EPS under recession - EPS under normal) / EPS under expansion) * 100 = (($0.75 - $1.24) / $1.24) * 100 = –39.52%

6 0
3 years ago
Which of the following items is a wardrobe essential for both men and women?
AysviL [449]

Answer:

Jeans

Explanation:

If you look around you are most likely to see more men than women wearing Khakis and most women don't wear button-up shirts

Sneakers are more worn by men.

5 0
3 years ago
Leisure Heating & Cooling installs and services commercial heating and cooling systems. Leisure uses job costing to calculat
marshall27 [118]

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Overhead is allocated to each job based on the number of direct labor hours spent on that job.

At the beginning of the current year:

The estimated overhead= $66,750.

Estimated direct labor hours= 4,450

In November, Leisure started and completed the following two jobs:

Job 101

Direct materials used= $16,000

Direct labor hours used=195

Job 102

Direct materials used= $ 10,500

Direct labor hours used= 72

Leisure paid a $30 per hour wage rate.

A) predetermined overhead rate= total estimated manufacturing overhead/ total amount of allocation base

predetermined overhead rate= 66,750/4450= $15 hour

B) Job 101:

Manufacturing overhead allocated= direct labor hours*predetermined overhead rate

Manufacturing overhead allocated= 195*15= $2925

Job 102:

Manufacturing overhead allocated= 72*15= $1080

C) Job 101:

Total cost= direct materials + direct labor + manufacturing overhead

Total cost= 16000 + 195*30 + 2925= $24,775

Job 102:

Total cost= 10500 + 72*30 + 1080= $13740

4 0
3 years ago
Which of the following illustrates Forward Vertical Integration? a. Subway sandwich company buying a bakery to make the bread fo
Shalnov [3]

Answer:

a

Explanation:

Vertical integration is when a firm acquires a business further in its production chain. For example, a sandwich company purchasing a bakery

4 0
2 years ago
On June 10, Concord Corporation purchased $8,050 of merchandise on account from Sarasota Company, FOB shipping point, terms 1/10
mariarad [96]

Explanation:

The journal entries are as follows in the books of Concord Corporation

On June 10

Merchandise inventory A/c Dr $8,050

              To Account payable A/c $8,050

(Being the inventory is purchased on account)                

On June 11

Merchandise inventory A/c Dr $510

             To Cash A/c $510

(Being freight is paid by cash)

On June 12

Accounts payable A/c Dr $450

    To Merchandise Inventory A/c $450

(Being goods returned is recorded)

On June 19

Accounts payable A/c Dr $7,600     ($8,050 - $450)

    To Cash A/c $7,524              ($7,600 × 1%)

    To Merchandise Inventory A/c $76

(Being payment is recorded)

6 0
2 years ago
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