Answer:
$8.30 million approx
Explanation:
The computation of the present value of the interest tax shield is shown below:
Year 0 1 2 3 4
Outstanding debt $100 million $75 million $50 million $25 million $0
Less: Interest $10 million $7.5 million $5 million $2.5 million
Less: Tax shield at 40% $4 million $3 million $2 million $1 million of interest
Discount factor at 10% 0.90909 0.82645 0.75131 0.68301
Present value $3.63 million $2.48 million $1.50 million $0.683 million
So, the present value is $8.30 million approx
The discount factor should be computed below
= 1 ÷ (1 + rate) ^ years
Answer: Option (d) is correct.
Explanation:
An indifference curve is a graphical representation of two goods which reflects all the combination of two goods to be consumed by the individual.
Indifference curves are convex to the origin and two indifference curves never intersect each other.
All the combination of two goods on a single indifference gives equal level of satisfaction and yield the same level of total utility.
1. A company's core capability is defined as the strategic advantages or the principal strengths of that company, including the combination of technical skills and pooled knowledge which allow the company to be competitive in the market place. The core capacities of a company allow it to do better in the market place than its competitors.
2.The core capabilities of Google, Walmart and Amazon include: excellent work culture, buying power, supply chain management, excellent use of information technology to support business, logistical superiority and international growth.
3. There are new market to which these companies could creatively apply their core capabilities. For example, Amazon can start offering assistance to researchers to write their scientific journals and to help them market it. Walmart can carve out a new market for itself by allowing customers to leave a list of what is needed every month. Walmart will then be supplying these to the people on a regular monthly basis. Google can expand its business to remote countries of the world, where internet access is not known yet by facilitating such in those areas. Google can also offer to help people search for what they need for payment.
Answer:
James will lose money, since his earnings will be lower than the interest that he must pay.
Explanation:
The capitalization (cap) rate is a ratio calculated by dividing the net operating income over the property asset value.
For example, if James is purchasing the property at $100,000, his net earning will be $7,500 per year (cap rate of 7.5%), but he will have to $8,000 in interests for the property. The interests are higher than the earnings, therefore the leverage is negative.
