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]
4 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]4 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]4 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
Benji works for a private firm that has been contracted to examine the books of accounts of the sanborn corporation. after she h
Lorico [155]
I would say that the work that Benji conducted on the books of the Sanborn Corporation would be classified as a financial audit because she checked their figures, examined their accounting procedures and prepared a report so this would qualify as an audit. 
5 0
4 years ago
Suppose an economy produces only burgers and bags of fries. In 2010, 4000 burgers are sold at $3 each and 6000 bags of fires are
sergejj [24]

Answer:

Option (C) is correct.

Explanation:

Nominal GDP:

= (No. of burgers sold × Selling price of each) + (No. of fries sold × Selling price of each)

= (4000 × 3) + (6000 × 1.5)

= 12,000 + 9,000

= $21,000

Real GDP (in 2008 prices)

= (No. of burgers sold × Selling price of each) + (No. of fries sold × Selling price of each)

= (4,000 × $2.50) + (6000 × $2)

= 10,000 + 12,000

= $22,000

GDP deflator:

= (Nominal GDP ÷ Real GDP) × 100

=  (21000 ÷ 22000) × 100

= 95.45

8 0
3 years ago
How is email like a business letter? How is it different from a phone call?
Tanzania [10]

Answer:

an email is more like a online letter while a phone call is in voice in real time

5 0
3 years ago
Read 2 more answers
An indication of one’s lifestyle is __________________.
Bezzdna [24]

Answer:

all of the above

Explanation:

all of these indicates one's lifestyles.

8 0
2 years ago
Chi-Ling thought it would be best to put Connor in charge of making decisions for the accounting team and Manami in charge of ma
Dmitry_Shevchenko [17]

The aspect of analyzing teamwork is Chi-Ling using is authority differentiation. Thus the option 3rd is correct.  

<h3 /><h3>What is Authority?</h3>

Authority refers to the power access by the individual or the government over the others. The authoritative person can make the decisions regarding the various sectors and make his subordinates to work in his accord.

The Chi ling has divided the work of the accounting and marketing between his employees and made the head of the  department. Thus this concept of analyzing the teamwork is known as authority differentiation.

The authority of the both the employees Connor and Manami is well defines they both will looking after their filed and are free to take decisions on their department.

Learn more about teamwork here:

brainly.com/question/18869410

#SPJ1

5 0
2 years ago
Other questions:
  • In September 2009 a U.S. investor chooses to invest $500,000 in German equity securities at a then current spot rate of $1.30/eu
    14·1 answer
  • Suppose the herfindahl indexes for industries a, b, and c are 7,200, 5,000, and 1,500, respectively. these data imply multiple c
    15·1 answer
  • Introduction: Drag each tile into the box where it best belongs. Causes of Recession. Cause of Recovery. loss of jobs for worker
    15·1 answer
  • A demand curve for the steel porcupines' concert tickets would show the:
    14·1 answer
  • Your friend says your car is worth about 50 dollars. Your friend is using money as a
    9·2 answers
  • The Forestville Freeze is regionally known for its employee training programs. Managers at the Freeze conduct research to determ
    6·1 answer
  • Most markets in the economy are A. markets in which buyers, rather than sellers, control the price of the product. B. perfectly
    10·1 answer
  • Information needed to prepare an income statement’s Expense section is obtained from a work sheet’s Account Title column and
    14·1 answer
  • The _____ prohibits the transfer of personal data to non-European Union nations that do not meet the European adequacy standard
    15·1 answer
  • Reasons for looting<br>​
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!