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
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

You might be interested in
Accounting systems that use standards for product costs are called budgeted cost systems. True False
Yuri [45]

Answer:

False.

Explanation:

Accounting systems that use standards for product costs are standard cost systems.

In Financial accounting, various business firms or companies use the standard cost systems to determine the variances or differences between the actual (real) cost of goods produced and the estimated cost for the goods that were produced by the company.

Hence, standard cost systems are used by business firms or companies as a strategic tool or technique for the management and control of costs, budget planning, and analyzing cost management performance at a specific period of time.

7 0
3 years ago
Karen and Jay need a larger home. They have two large dogs and a baby on the way. One day in the real estate section, they see t
juin [17]

Answer: BRIDGE LOAN

Explanation: As the name says the bridge loan are the type of loans that bridge the difference between the new home of the buyer and the new mortgage in case the buyers existing home hasn't been sold yet. It is a type of short term loan, the usual time period for such kinds of loan is 2 weeks to 3 years.

In this case Karen and Jay have purchased the new house but sale of their old house is still pending thus from the above explanation we can conclude that bridge loan would be appropriate for them.

6 0
3 years ago
The responsibility for evaluating new technologies, new ideas, and new capabilities and identifying those that are most relevant
Rasek [7]

The responsibility for evaluating new technologies, new ideas, and new capabilities and identifying those that are most relevant to the organization is typically assigned to the <u>Chief technology officer​ (CTO)</u>

<u></u>

<u></u>

The chief technology officer (CTO) is the highest technical leadership position within a company, leading the technical or engineering department. Create policies and procedures and use technology to improve our external customer-focused products and services.

The Chief Technology Officer (CTO) is the executive responsible for overseeing the entire IT department and integrating business needs and requirements into IT planning and operations. It's important to distinguish their role from that of the Chief Information Officer (CIO). The Chief Information Officer (CIO) role focuses on technology that internally guides an organization through the management of its infrastructure. The Chief Technology Officer has a job description focused on developing technologies for customer sales and the external growth of the company. The CTO and her CIO often combine their technical and engineering knowledge to work together for the benefit of the entire organization.

<u></u>

Learn more about the Chief technology office here brainly.com/question/17999351

#SPJ4

5 0
2 years ago
Namita is voting in a state election. She selects the candidate she wants to be state senator, a position that involves drafting
Mashcka [7]

Answer:

Representative democracy.

Explanation:

Representative democracy refers to a system where the people govern through the election of parties or representatives with decision-making rights. Representative democracy can also be seen as a collective term for a number of democratic models. Common to these, however, is that the core consists of regularly recurring elections between competing representatives. People's sovereignty is achieved by the citizens influencing the government by voting in these elections. It is by far the most widespread method of exercising authoritative and legitimate control, demanding responsibility and developing debate in modern democracies.

5 0
2 years ago
One of the most widely followed stock indexes in the united states is the dow jones industrial average. this index represents
OleMash [197]
<span>Dow Jones Industrial Average (DJIA) is the widely followed and best known stock index because it is composed of companies that are under the industrial and consumer industry. The price of the stock under the Dow Jones Industrial Average is divided by divisors which are used in this index.</span>
5 0
2 years ago
Other questions:
  • .) A currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one year. The one-year interest rate in th
    14·1 answer
  • Classify each item as an asset, liability, common stock, revenue, or expense. (a) Issuance of ownership shares. select the corre
    9·1 answer
  • Bramble Corp. had 1420000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1254
    10·1 answer
  • In which of the following scenarios would the short-cut method be permissible? A) A lease term of 6 months with an option to ren
    7·1 answer
  • Ginny currently earns a (real or nominal) wage of $12.00 per hour; in other words, the amount of her paycheck each week is $12.0
    11·1 answer
  • Renting provides _________ flexibility but can lead to _________ costs in the long-term.
    5·1 answer
  • This section of the VITA/TCE certification Foreign Student test covers determining residency status, the use of Form 8843, and f
    6·1 answer
  • Splish Brothers Inc. reported a net loss of $14400 for the year ended December 31, 2022. During the year, accounts receivable de
    12·1 answer
  • Concord Inc. had beginning inventory of $11,900 at cost and $21,000 at retail. Net purchases were $140,679 at cost and $183,000
    9·1 answer
  • Which characteristic is most important in identifying which data to collect for marketing research?
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!