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
AURORKA [14]
2 years ago
8

Problem 16-15 MM and Taxes [LO2] Meyer & Co. expects its EBIT to be $111,000 every year forever. The firm can borrow at 8 pe

rcent. The company currently has no debt, and its cost of equity is 12 percent and the tax rate is 22 percent. The company borrows $165,000 and uses the proceeds to repurchase shares. a. What is the cost of equity after recapitalization? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Aleks04 [339]2 years ago
4 0

Answer:

a) 12.87%

b) 11.03%

Explanation:

EBIT with no debt = $111,000

net income = $111,000 x (1 - 22%) = $86,580

total value of the firm with no debt = $86,580 / 12% = $721,500

value of the firm after debt is taken = $721,500 + ($165,000 x 22%) = $757,800

debt to equity ratio after debt is taken = $165,000 / ($757,800 - $165,000) = 27.834%

new cost of equity (Re) = 12% + [(12% - 8%) x 27.834% x (1 - 22%)] = 12.87%

WACC = (0.72166 x 12.87%) + (0.27834 x 8% x 0.78) = 9.288% + 1.737% = 11.025$ = 11.03%

You might be interested in
ppreciation of the euro relative to the U.S. dollar will cause a U.S.-based MNC's reported earnings (from the consolidated incom
Tems11 [23]

Answer:

Decrease or fall, Purchasing

Explanation:

Appreciation is the term which is defined as the increase in the currency value relative to the another currency, which could be exchanged for a huge amount of foreign currency.

So, when there is appreciation in euro in relation to US dollar, it cause US grounded MNC reported earnings to decrease as the US dollar will not be exchanged because euro is appreciated.

And when the firm desire to reduce the exposure to the exchange rate movements, it might stabilize the reported earnings through purchasing the euros in the foreign exchange market.

6 0
3 years ago
Which is the best measure of risk for a single asset held in isolation (Stand Alone Investment), and which is the best measure f
borishaifa [10]

Answer:

  • Single asset = Coefficient of Variation
  • Portfolio = Beta

Explanation:

When dealing with standalone risk, coefficient of variation is best because it shows the amount by which the asset's returns might deviate from the average returns of the market.

As for portfolio assets that are well diversified, the best measure would be beta because diversified portfolios deal with systematic risk and beta shows the movement of the portfolio in relation to the market and so will show that systematic risk.

4 0
2 years ago
This is a sum of numbers that accumulates with each iteration of a loop. A. Running total B. Final total C. Grand finale D. Gall
kicyunya [14]

Answer:

The correct answer is A. Running total.

Explanation:

The accumulated total can be expressed as a numerical value or a percentage. In Reporter reports, you can calculate a cumulative total for more than one category.

For example, you can create a report that shows the income for each of the last four quarters. The accumulated total will show the total income at the end of each quarter. If you add a cumulative total as a percentage of the total sold, you can see the percentage of year-round sales achieved at the end of the quarter.

7 0
2 years ago
When using horizontal differentiation, a firm divides itself into subunits based on function, type of business, or.
Karo-lina-s [1.5K]

When using horizontal differentiation, a firm divides itself into sub units based on function, type of business, or Geographic area

Horizontal differentiation

Is basically concerned with how the firm decides to divide itself into sub units. The decision is typically made on the basis of function, type of business, or geographical area. In many firms, just one of these criteria predominates, but more complex solutions are adopted in others. This is particularly likely in the case of international firms, where the conflicting demands to organize the company around different products (to realize location and experience curve economies) and different national markets (to remain locally responsive) must be reconciled. One solution to this dilemma is to adopt a matrix structure that divides the organization on the basis of both products and national markets.

Functional structure :

A functional structure can work well for a firm that is active in a single line of business and focuses on a single geographic area. But problems can develop once the firm expands into different businesses or geographies.

Learn more about Horizontal differentiation :

brainly.com/question/17203768

#SPJ4

4 0
1 year ago
Robert works for a manufacturing company. His job profile requires that he keep track of the amount of raw materials that the bu
Schach [20]

Answer:

B. Inventory control

Explanation:

Inventory is the term used to describe products in the various stages of production. Inventory refers to the raw materials used to make products, goods partially produced( work -in -progress), and the finished goods awaiting sales.

Robert's responsibilities revolve around inventory control. He is part of the supply chain team that coordinates material movement from the source, in the production process, and delivery to the market.

6 0
3 years ago
Other questions:
  • Several legal steps must sometimes be taken before a creditor can have his outstanding debt satisfied through the sale of the de
    11·1 answer
  • Government officials and concerned citizens would be classified as _____ project stakeholders.
    9·1 answer
  • Tiffany purchased a $10,000, 13-week Treasury bill that is paying 2.25%. What is the effective rate on this T-bill?
    7·1 answer
  • During its first month of business, Kochanski Company reported net cash flows from operating activities of $5,000, net cash flow
    5·1 answer
  • "A process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade
    11·1 answer
  • Priscella pursued a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is $40,000. During 2019 s
    10·1 answer
  • The concept of demand is best described as the quantity of a good or a service that people will offer for sale at different poss
    15·1 answer
  • Incremental costs - Initial and terminal cash flow
    8·1 answer
  • Dufner Co. issued 17-year bonds one year ago at a coupon rate of 6.3 percent. The bonds make semiannual payments. if the YMT on
    12·1 answer
  • Azure inc. , an information technology company, uses a quartile strategy and positions itself in the third quartile to develop i
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!