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stepladder [879]
3 years ago
11

The owner of Grandma's Applesauce is planning to retire after the coming year. She has to repay a loan of $50,000 plus 8 percent

interest and must rely on cash flow from operations to do so. Cash flow from operations is uncertain; there is a 70% probability it will equal $65,000, and a 30% probability it will equal $45,000.
Assuming a tax rate of 0%, what is the owner's expected cash flow after debt service?

A. $9,000 B. $5,000 C. $11,000 D. $7,700
Business
1 answer:
Aleks04 [339]3 years ago
3 0

Answer:

Option (B) $5,000

Explanation:

Data provided in the question:

Repayment of Loan = $50,000

Interest = 8%

Cash flow             Probability

$65,000                    70%

$45,000                    30%

Tax rate = 0%

Now,

Interest on loan = 8% of $50,000

= $4,000

Expected value of cash flow = ∑[cash flow × Probability ]

= ( 0.7 × $65,000 ) + ( 0.3 × $45,000 )

= $45,500 + $13,500

= $59,000

The owner's expected cash flow after debt service

= Expected value of cash flow - Interest on loan - Repayment of Loan

= $59,000 - $4,000 - $50,000

= $5,000

Hence,

Option (B) $5,000

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Shelton, Inc. has sales of $435,000, costs of $216,000, depreciation expense of $40,000, interest expense of $21,000, and a tax
Ad libitum [116K]

Answer:

The Income Statement  is-

Sales = $435,000

Costs = 216,000

Depreciation = 40,000

EBIT= $179,000

Interest = 21,000

EBT = $158,000

Taxes = 55,300

Net income = $102,700

I have done this question before in my "Money Management" Dual enrolled class.

:)

4 0
3 years ago
Brickhouse is expected to pay a dividend of $2.85 and $2.34 over the next two years, respectively. After that, the company is ex
irina1246 [14]

Answer:

The stock price is $31.14

Explanation:

The value of Brickhouse stock today is the present values of future cash flows from the stock discounted using the required rate of return of 10.7% as the discount  rate as done below:

Years               cash flows  discount factor                        Present values

1                            $2.85     1/(1+10.7%)^1=0.903342367        $2.57

2                            $2.34    1/(1+10.7%)^2=0.816027432         $1.91

3 & beyond          *$32.67  1/(1+10.7%)^2=0.816027432         $ 26.66  

                                                             total present values= $31.14

* the year 3 and beyond represents the terminal value of the stock,which is computed using the formula below

=D2*(1+g)/r-g

D2 is the year dividend of $2.34

g is the dividend growth rate of 3.3%

r is the required rate of return which 10.7%

terminal value=$2.34*(1+3.3%)/(10.7%-3.3%)

                        =2.41722 /0.074 =$32.67  

6 0
3 years ago
Because services are __________, it is often difficult for marketers to convey the benefits to consumers.
muminat

Because the services are intangible, it is often difficult for the marketers to convey benefits to consumers.

<h3>Who is a marketer?</h3>

A marketer is someone who advertises the goods and services of an organization. They identify the tactics that can increase revenue and sales while making sure that these tactics are in line with both customer and market need. Now that we are aware of what a marketer is, let's examine their function. Let's first examine the function that a marketer does before delving into the importance of marketing for firms. The financial success of any firm can be determined by the marketer's ability to sell. They make sure that the goods and services are promoted effectively enough to sustain demand. Long-term brand equity and improved consumer experiences are enhanced by imaginative and creative marketers.

To learn more about marketing. visit

brainly.com/question/13414268

#SPJ4

5 0
1 year ago
You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options.
Alexxandr [17]

Answer:

Instructions are listed below

Explanation:

Giving the following information:

For the purchase​ option:

Buying price= ​$22 per unit.

For the make​ option:

Weekly rental payment of ​$30,800

The firm also has to hire five operators to help make product A. Each operator works eight hours per​ day, five days per week at the rate of ​$14 per hour.

The material cost for the make option is ​$15 per unit of product A.

A) We need to find the number of units that makes the unitary fixed costs= $7

Weekly rental= 30800

Direct labor= ($14*8 hours*5workes)*5 days= 2800

Total fixed costs= $33,600

Unitary fixed costs= total fixed costs/ Q

7=33600/Q

Q= 4800 units

B) Now Q= 6600

Buy= 6600*22= $145,200

Make= 6600*15 + 33600= $132,600

3 0
3 years ago
Ben and Carla Covington plan to buy a condominium. They will obtain a $229,000, 20-year mortgage at 5.0 percent. Their annual pr
Alla [95]

Answer:

$1,943.06

Explanation:

Monthly mortgage payment: $6.6 X $229 = $1,511.4

Monthly property taxes: $1,550/12 = $129.16

Monthly property insurance: $630/12 =$52.5

Monthly association fee: $250

Total monthly housing payment: $1,943.06

4 0
3 years ago
Read 2 more answers
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