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Roman55 [17]
3 years ago
8

DAR Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under P

lan I, the company would have 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $2.21 million in debt outstanding. The interest rate on the debt is 7 percent and there are no taxes. Use M&M Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $ per share What is the value of the firm under each of the two proposed plans?
Business
1 answer:
andreyandreev [35.5K]3 years ago
3 0

Answer:

Value of firm in levered plan = $4,930,000

Explanation:

We can find the price per share by dividing the amount of debt used to repurchase shares by the number of shares repurchased. Doing so we get the share price:

Share price = $1,450,000 / (170,000 -120,000)

Share price = $29

Now the value of firm in all equity plan = $29 x 170,000 = $4,930,000

Value of firm in levered plan = $29 x 120,000 + $1,450,000

Value of firm in levered plan = $4,930,000

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Answer:

Overhead at the end of the year was $3,570 under-applied

Explanation:

For computing the ended overhead amount, first, we have to compute the predetermined overhead rate. The formula is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)

= $521,220 ÷ 21,900 hours

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Now we have to find the actual overhead which equals to

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So, the ending overhead equals to

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= $521,220 - $517,650

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Panther Co. had a quality-assurance warranty liability of $359,000 at the beginning of 2018 and $308,000 at the end of 2018. War
evablogger [386]

Answer:

d.$1,371,000

Explanation:

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