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timama [110]
3 years ago
11

Calvert Corporation expects an EBIT of $25,300 every year forever. The company currently has no debt, and its cost of equity is

15.3 percent. The company can borrow at 10.1 percent and the corporate tax rate is 25 percent. a. What is the current value of the company
Business
1 answer:
Nataly [62]3 years ago
4 0

Answer:

Value of the company = $124,019.61

Explanation:

<em>The value of then firm is the present value of its expected future cash inflow discounted at its required rate of return. </em>

<em>In this case, the earnings available to ordinary shareholders becomes the annual cash inflow while the appropriate discount rate is the cost of equity</em>.

The absence of debt in the company's capital structure implies that the cost of equity would be the appropriate discount rate.

And the  value of the company would be determined as follows

Value of the company = Earnings after tax/Cost of equity

Earnings after tax = EBIT × (1-Tax rate)= 25,300×(1-0.25)=18,975

Cost of equity = 15.3%

Value of the company = 18975 /0.153= 124,019.6078

Value of the company = $124,019.61

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Which of the following describes the expected outcome of expansionary monetary policy in the short run?
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Answer:

The correct answer is letter "A": higher employment, higher output, and a higher price level.

Explanation:

Expansionary policy is a macroeconomic concept that focuses on expanding the economy to counteract cyclical downturns. Expansionary policies can be used through monetary policy to expand the money supply or to increase government expending and tax cuts to stimulate the economy. Under this scenario, interest rates are lower and aggregate demand increases. In that case, employment, output, and price level will be higher. Though, the latter is dangerous since it could lead to high inflation.

7 0
3 years ago
Jill buys a refrigerator and pays the company to have it delivered. While the contract covers both a good and a service, this tr
Dominik [7]

Answer:

Article 2 of the UCC(Uniform Commercial Code).

Explanation:

UCC is said to be an acronym which stands for the Uniform Commercial Code; this is seen also to govern many different forms of contract interactions. Article 2 in most cases are seen to cover common issues ranging from

i). Goods definition of i.e any tangible item that can be moved.

ii). Situations involving missing terms in a contract, such as a missing quantity, price etc.

iii) Contract modifications and lastly

iv). Exchanges of consideration for items of value.

Alot of research has shown in most cases that article 2 is a popularly cited provision in this body of statutes, since it governs contracts for the sale of goods between merchants or between a merchant and a non-merchant.

3 0
3 years ago
Compare a market operating at a quantity lower than equilibrium with the same market operating at the equilibrium quantity. Whic
topjm [15]

Answer:

a.) the economic surplus is greater at the equilibrium quantity.

Explanation:

This is correct because at lower production levels a dead weight is created of the potential surplus that is not obtained either for producer nor consumers. At equilibrium, the maximum surplus is achieved and is allocated among producers and consumers

6 0
3 years ago
Which of the following accounts would not be included in the closing process at year-end?a) Rent expense.b) Additional paid-in c
hammer [34]

Answer:

b) Additional paid-in capital.

Explanation:

Closing process in accounting is a period end activities which involves

the movement or transfer of temporary accounts to permanent accounts.

Temporary accounts are all income statement accounts like sales account, rent account, depreciation expense account, telephone expense account e.t.c.

This exercise is to prepare temporary accounts for the next period.  since temporary accounts are measured as at period end, the transaction of a period must not be allowed to mix with another, hence the need to always close or bring to zero all temporary accounts.

In the question, all are income accounts except additional paid-in capital

3 0
3 years ago
Standahl Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports.
avanturin [10]

Answer:

$335,428

Explanation:

The computation of the plane operating cost is shown below:

Plane Operating Cost = Fixed cost + (Variable cost per unit × quantity) + (Variable cost per unit × quantity)

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We only considered the planned activity as we have to compute the plane operating cost for the planning budget

8 0
3 years ago
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