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qaws [65]
3 years ago
7

1. The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity

for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Aggie.
Business
2 answers:
Elina [12.6K]3 years ago
6 0

Answer:

$263,081

Explanation:

Leverage is the condition of the gearing company. The debt of the company makes it the levered company. It account for the debt factor of the company. Whereas unlevered company has no debt.

Unlevered Value of the company = EBIT x ( 1 - Corporate Tax ) / unlevered cost of equity

Unlevered Value of the company = $50,000 x ( 1 - 35% ) / 14% = $232,143

Levered Value of the company = Unlevered Value of the company + debt x ( 1 - (1-corporate tax rate)*(1-tax on equity rate)/(1-tax on debt receipts)

Levered Value of the company = $232,143 + $100,000 x ( 1 - ( 1 - 0.35 ) x (1-0.15)/(1-0.2)

Levered Value of the company = $263,081

Maru [420]3 years ago
5 0

Answer:

$263,080.36

Explanation:

Aggie Company

Unlevered firm = [$50,000 (.65)]/ .14

=$32,500/.14

= $232,142.86

Miller leverage tax shield value =

[1 - ((1 - Tc)(1 - Ts)/(1 - Tb))]B

= [1 - ((1 - .35)(1 - .15)/1 - .20))]*$100,000

=[1-(0.65)(0.85)/0.8]*$100,000

=[1-05525/0.8]*$100,000

=(1-0.690625)*$100,000

=0.309375*$100,000

= $30,937.50

Hence:

Total Value = $232,142.86 + $30,937.50

= $263,080.36

Therefore the value of Aggie company will be

$263,080.36

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marshall27 [118]

Deposit accounts, Investment Property, and Letter-of-credit Rights. Thus option (A) is correct

<h3>What is the investment?</h3>

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Whether or not there is a current obligation to be secured, a person who has the benefit of the security interest generated by or provided for under a security arrangement is known as a secured party under UCC law. when the secured party is in possession, a duty of care.] A secured party must take reasonable care to keep the collateral it has in its possession safe unless subsection (d) provides otherwise.

Therefore, Thus option(A) is correct

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Which of these is an example of "serving the bottom of the pyramid"? a. Car-a-Go-Go Inc. is an MNC that specializes in luxury ca
inysia [295]

Answer:

Option B is Correct.

Explanation:

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3 years ago
During the first week of October, the workers at Walton's Widget Factory produced the following outputs: on Monday, 10 workers p
EleoNora [17]

Answer:

The average product of labor per day is 324

Explanation:

To find the average product of labor per day we need to know the total number of widgets produced divided by the worked days.

Average Product= total number of widgets /days

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Tuesday, 11=286 widgets

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8 0
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13. Assume that Cane’s customers would buy a maximum of 80,000 units of Alpha and 60,000 units of Beta. Also assume that the raw
timurjin [86]

Answer:

80000 unit of Alpha

Explanation:

This is a Limiting factor/resource constraint question. In certain situations entities suffer from shortage of necessary resources (e.g: shortage of material, labor hours, machine hours), in such circumstances entities strive to allocate the constraint resources to the production of those products which generate the highest contribution per limiting factor and help maximize total contribution. In this case the limiting factor for Cane is Raw material.

Lets suppose that each unit of <em>Alpha and Beta sell for $120 and $80</em> respectively and variable cost per unit of <em>Alpha and Beta is $69 and $20 </em>respectively. Each unit of <em>Alpha and Beta require 2 and 5 pounds</em> of raw material for production respectively.

Now that we have supposed the data we have to compute contribution per unit and then contribution per limiting factor and based on the ranking (i.e highest first) of contribution per limiting factor we decide which product should be given priority for resource allocation.

<em>Lets calculate contribution per unit.</em>

Alpha:

Contribution per unit= SP-VC

Where, SP stands for selling price and VC stands for variable cost.

CPU= 120-69

CPU=$51

Beta:

Contribution per unit= 80-40

CPU=$40

<em />

<em />

<em>Now, lets calculate contribution per limiting factor.</em>

Alpha:

CLF: $51÷2

CLF: $25.5        1st Rank

Beta:

CLF: $40÷5

CLF: $8              2nd Rank

So clearly Alpha has a greater contribution per limiting factor and it implies that Alpha will earn the highest contribution margin therefore Cane should produce and allocate resources to Alpha first and then Beta if there remains any?

Profit maximizing output:

It requires 2 pounds of raw material to produce one unit of Alpha (i.e 80000×2=160000) Therefore Cane should produce 80000 units of Alpha only in order to maximize its profits.

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