If inflation is lower than expected, it would benefit the union and it would be a disadvantage to Friendly Airlines because the real wage increase would now be 4%.
<h3>What is inflation?</h3>
Inflation is when there is a general increase in the general price level of an economy. If inflation turns out to be lower than expected, the employers would be at a disadvantage while the employees would be at advantage because there would be an increase in their real wages.
Increase in real wage = real increase in wage + (expected inflation + actual inflation)
3% + (6% - 5%) = 4%
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Answer:
Increase by $6,000
Explanation:
Calculation to determine the net operating income
Using this formula
Net operating income=Expected sales increase ×Contribution margin ratio-Fixed expenses
Let plug in the formula
Net operating income=$70,000 x 30% - $15,000
Net operating income=$21,000-$15,000
Net operating income=$6,000 increase
Therefore the net operating income will increase by $6,000
Answer:
d.select the unlevered option since the expected EBIT is less than the break-even level
Explanation:
Unlevered option comprises of more equity than the debt, and is thus less risky. While an option leveraged is even more debt than equity, which brings additional risk. Since the estimated EBIT is below the break-even point, it would be safer to go for an unlevered (less riskier) option.
Hence, the correct option is d.
Answer:
$115 million
Explanation:
Calculation for the present value of the business.
Using this formula
Present value=Free cash flow+Horizon value
Where,
Free cash flow =$15 million
Horizon value=$100 million
Let plug in the formula
Present value=$15 million +$100 million
Present value=$115 million
Therefore the Present value of the business will be $115 million
