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
______ can be defined as the general plan of action that describes resource allocation and other activities for dealing with the
Mamont248 [21]
Business can be defined
5 0
3 years ago
Tucker's Trucking is considering a project with a discounted payback period just equal to the project's life. The projections in
Vinil7 [7]

Answer:

Break-even quantity= 9520 units

Explanation:

Giving the following information:

The projections include a sales price of $39.

Variable costs per unit of $14.

Fixed costs of $238,000.

The operating cash flow is $24,300.

Break-even quantity= Fixed costs/contribution margin

Break-even quantity= 238000/(39-14)= 9520 units

4 0
3 years ago
Which of the following set the first minimum wage? The Taft-Hartley Act of 1947 The AFL-CIO The Norris-LaGuardia Act of 1932 The
lara31 [8.8K]

Anscbhbdvbfvbfhb

Explanation:

6 0
3 years ago
Bonnie's coworker reports an error that Bonnie made to the manager. Bonnie is mad and gets back at her coworker by starting an u
Gekata [30.6K]

Answer:

<u>Unethical work behavior</u>

Explanation:

It is very unfortunate in many organization for such kind of scenarios to occur which could lead to dismissal from work if the  gets to know about the attitude.

Remembering that no one will be pleased totally in workplace you will have to give people the benefit of the doubt by trusting them because If we all run around mistrusting others, we end up creating a miserably unhappy business culture.

3 0
3 years ago
Distinguish between positive and negative confirmations. Under what circumstances would positive confirmations be more appropria
Serhud [2]

Negative confirmation is more frequently employed when the records of the person or business are usually thought to be quite accurate.

<h3>What is the difference between negative and positive confirmations?</h3>

Only when the customer disagrees with the amount owed to the client is a negative confirmation requested. When an account has substantial individual balances or when errors are anticipated due to a high control risk, positive confirmations are typically used.

Negative confirmation is more frequently employed when the records of the person or business are usually thought to be quite accurate. The corporation that receives a negative confirmation is typically thought to have strict internal policies and business procedures. As a result, since auditors typically only need to send out one letter, negative confirmation is far less expensive and time-consuming for them.

Positive confirmation requests, on the other hand, are more complicated since financial documents must be provided, even if the information in the original letter was accurate. Additionally, if there are doubts about the accuracy of the company's books, positive confirmation requests are more likely to be used.

However, because it is more precise and makes sure that everyone is on the same page—or has the same financial information—a positive confirmation letter is more typical in complex transactions. For instance, auditors in lending employ affirmative confirmations from banks and businesses to determine the precise amount of a loan.

Because it is a specific request that the recipient has responded to, a positive confirmation typically represents the financial information better than a negative confirmation. A positive confirmation is tangible proof that the information was confirmed in the event of a disagreement.

To learn more about negative and positive confirmations refer to:

brainly.com/question/15908185

#SPJ4

7 0
1 year ago
Other questions:
  • Andrew, an employee in a corporate company, is asked to conduct a systematic evaluation of how well the company is meeting its e
    7·1 answer
  • The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket re
    5·1 answer
  • This is an example of an?
    7·1 answer
  • Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp busines
    7·1 answer
  • One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is $1.25 and standard fixed overhead per
    13·1 answer
  • After marketers have defined a problem they need to solve, what is the next
    5·2 answers
  • A researcher submits a study to the irb that proposes
    14·1 answer
  • DIFFERENCE BETWEEN EQUITY SHARES AND PREFERENCE SHARES FOR 3 MARKS
    8·1 answer
  • Lauren has gross pay of $765 and federal tax withholdings of $68. Determine Lauren's net pay if she has the additional items wit
    13·1 answer
  • If a company exchanges an asset with a book value of $260,000, an original cost of $500,000, and a fair value of $300,000 plus c
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!