g Product #1 Product #2 Historical cost $26 $51 Replacement cost 16 28 Estimated cost to dispose 23 25 Estimated selling price 5
1 answer:
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Answer:
increase by $11,000
Explanation:
The computation of net operating income is shown below:-
Revenue = Sales per unit × Sales price per unit
= 3,000 × $70
= $210,000
Less variable costs = Sales per unit × Variable cost per unit
= 3,000 × $50
= $150,000
Fixed costs = $25,000
Net income = Revenue - Less variable costs - Fixed costs
= $210,000 - $150,000 - $25,000
= $35,000
Contribution margin per units = $70 - $50
= $20
Increase by 10%, it will be
$20 × (1 + 0.1)
= $22
If it decrease by 20%
= $25,000 × (1 - 0.20)
= $20,000
Net income = $3,000 × 22 - 20,000
= 46,000
So it was 35,000, with the changes it is 46,000. That increase by $11,000
Answer:
the firm's cost of debt financing = 6.682 %
Explanation:
Given that:
St. Thomas Company is planning to issue $1,000 par value bonds.
Bond coupon rate = 9.5
which will be sold at $980
Floating cost = 1 - 4 % of the market value
The bonds will mature in 15 years and coupon payments will be semi-annual .i.e Period = 15 × 2
Marginal tax rate = 35%
The objective is to determine the firm's cost of debt financing
From the information given ; we can use the EXCEL Spreadsheet to compute the value for the cost of debt then after that we will be able to find the firm's cost of debt financing.
The following data will be inserted into the Excel function (=RATE(15*2;0.095/2 *1000;-980*(1-4%);1000) )
Future value Fv= 1000
Payment Pmt =0.095/2 *1000
number of period Nper= 15 × 2
Present value Pv= -980 × (1 - 4%)
Output = 0.051413309 5.14%
The Screenshot of the Excel Computation is also shown in the attached file below.
Pre tax cost of debt = 2 × cost of debt
Pre tax cost of debt = 2 × 5.14% = 10.28%
FInally ;
the firm's cost of debt financing = Pre-tax cost of debt × (1 - Tax rate)
where the marginal tax rate = 35%
the firm's cost of debt financing = 10.28% × (1 - 35%)
the firm's cost of debt financing = 0.1028 ×( 1 - 0.35)
the firm's cost of debt financing = 0.1028 × 0.65
the firm's cost of debt financing =0.06682
the firm's cost of debt financing = 6.682 %
