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
mars1129 [50]
3 years ago
11

Charisma, Inc., has debt outstanding with a face value of $6 million. The value of the firm if it were entirely financed by equi

ty would be $28.4 million. The company also has 415,000 shares of stock outstanding that sell at a price of $56 per share. The corporate tax rate is 25 percent. What is the decrease in the value of the company due to expected bankruptcy costs? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
Business
1 answer:
Gnesinka [82]3 years ago
4 0

Answer:

$660,000

Explanation:

According to M & M proportion I with taxes, the value of the levered firm is:

V (Firm) = V (Equity) + V (Debt)

             = $28,400,000 + 0.25(6,000,000)

             = $28,400,000 + $1,500,000

             = $29,900,000

Total market value of the firm:

= Market value of the debt + Market value of equity

= $6,000,000 + stock outstanding × Selling price per share

= $6,000,000 + 415,000 × $56 per share

= $29,240,000

With non-marketed claims, such as bankruptcy costs, we would expect the two values to be the same.

The differences are the non-marketed claims:

Expected bankruptcy costs = $29,900,000 - $29,240,000

                                              = $660,000

You might be interested in
Which of the following is false regarding the FIFO inventory method?
puteri [66]

Answer: All of the other answer choices are true.

Explanation:

FIFO simply refers to “First-In, First-Out” and the method assumes that the oldest goods that are in the inventory of a company have been sold first and therefore, the costs that are paid for them will be used for the calculation.

The following are true regarding the FIFO method:

• FIFO under a perpetual inventory system results in the same cost of goods sold as FIFO under a periodic inventory system.

• A company can choose to account for the flow of inventory using the FIFO method even if this doesn’t match the actual flow of its inventory.

• Perishable goods often follow an actual physical flow that is consistent with the FIFO method assumptions.

Therefore, the correct option is D as all are true.

4 0
3 years ago
While filling out a personal assessment, a student notices that many of her interests involve science and research. Therefore, t
olya-2409 [2.1K]
Technology cluster would be your best bet.
3 0
3 years ago
Read 2 more answers
Technology has proliferated in Kenya and Somaliland, with text messages used to replace cash, creating mobile money use that, on
Tasya [4]

Answer: True

Explanation:

Something that has caught the attention of many has been how electronic money has been used in countries like Kenya and Somalia. A study has confirmed that the use of mobile money has reduced poverty in places like Kenya. Mobile money is defined as money where people can make financial transactions through their phones.

This type of activity has greatly influenced poverty reduction and the high rates that occurred when people had to send money over certain distances. In countries like Somalia, there are no longer any traces of physical money, everything is virtual. In this way, the country has achieved economic stability for years. People increasingly consume through their mobile phones, making in an easier way all kind of payments.

7 0
3 years ago
2. A closer estimate of the total cost can be made by including the estimated sales tax. Use a formula to calculate the estimate
Kazeer [188]

Answer: Hello  your question has some missing details hence I will provide an answer based on the general scope of your question

answer ; =([Cost] * 1.07)

Explanation:

Assuming the table heading for estimated cost in July 2014 is named "Cost"

Total estimated cost

Total =  Cost * ( 1 + Sales Tax )

         = Cost * ( 1 + 0.07 )

         = Cost * 1.07

Excel  equivalent formula used that can be used  = ([Cost] * 1.07)

5 0
2 years ago
What is the difference between a capital gains tax and an income tax?
Luda [366]

Answer:

C. One is assessed on the profit made from selling an asset; the

other is assessed on earnings from work or investments.

Explanation:

The capital gains tax occurs only if as a result of the sale of an asset there is a profit that is exceptional and differ from the primarily economic activity of the person that made the sell.

4 0
3 years ago
Other questions:
  • Green hybrid auto corporation pays its executives an excessive amount relative to what lower-level employees at the company rece
    15·1 answer
  • Heather wants to buy a new tent. she so far has saved $23 and her parents have told her that any remaining money she saves they
    15·1 answer
  • What future IT capability needs (both physical and human) could the organisation have with respect to document design and produc
    11·1 answer
  • P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash receipts from the sale are immediately deposit
    12·1 answer
  • A change in interest rates would shift the consumption schedule and the saving schedule ______; a change in taxes would shift th
    12·1 answer
  • A country has reached a level of economic development where the manufacturing of both semidurable and nondurable consumer goods
    11·1 answer
  • What is one advantage corporations have over other types of businesses?
    5·2 answers
  • GROCERY STORE PROBLEM: A local grocery store faces demand for one of its items at a constant rate of 20,000 boxes per year. It c
    10·1 answer
  • South Carolina Industrial Products' bonds have a 7.00 percent coupon and pay interest annually. The face value is $1,000 and the
    9·1 answer
  • Many advertising organizations say that applying the term "unfair" to an advertisement is
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!