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
NeTakaya
2 years ago
10

Assume that instead, the debtholders had negotiated a covenant based on the maximum amount of investment (so, they set a maximum

on the amount of investment, such as the $500in project costs). Assume that the probabilities and returns are proportionate (so, 40%probability that you double your money, and 60% chance that you lose your investment). What is the maximum amount of investment into this type of project that would allow shareholder and debtholder incentives to be aligned (should be less than $500 in this instance)?
Business
1 answer:
Ulleksa [173]2 years ago
3 0

Answer:

if we assume that the maximum investment must reach $ 500 Then the maximum that the shareholder should invest with $ 500  to not exceed the investment covenant, considering that these $ 500 have a 40% chance to earn $200. debtors should always consider the maximum amounts required in financial covenants.

E

You might be interested in
Pepe, Incorporated acquired 60% of Devin Company on January 1, 2017. On that date Devin sold equipment to Pepe for $45,000. The
krek1111 [17]

Answer:

The loss on equipment recognized by Devin on its internal accounting records for 2017 is $9,000

Explanation:

By using the given information which is mentioned in the question, first we have to calculate the book value of equipment.

So, the book value of the equipment is equals to

= Cost price - accumulated depreciation

= $120,000 - $66,000

= $54,000

Now we can calculate the loss or gain on sale of equipment which is equals to

= Sale price - book value

= $45,000 - $54,000

= - $9,000

Since, the amount shows negative which means the company has suffered a loss of $9,000 on equipment

The other things like net income of 2017 and 2018 is irrelevant because it tells the net income of overall company not for equipment. So, it is not being considered while computation

Hence,  the loss on equipment recognized by Devin on its internal accounting records for 2017 is $9,000

7 0
3 years ago
Aaron promises to sell his boat to Matt, and Matt promises to buy it from Aaron. What type of contract is this? Group of answer
Minchanka [31]

Answer: c. A bilateral contract

Explanation:

In a bilateral contract, the parties involved promise to both perform duties to the other which will make them both an obligor and an obligee.

An obligor is one who owes a duty to another and the obligee is one who a duty is owed to.

Aaron both owes a duty to sell the boat to Matt as well as being owed by Matt the duty to buy his boat. The same goes for Matt thus making this a bilateral contract.

5 0
3 years ago
Abardeen Corporation borrowed $90,000 from the bank on October 1, 2018. The note had an 8 percent annual rate of interest and ma
TiliK225 [7]

Answer:

Interest paid in cash in 2018 = $0

Interest recognized on the Income statement = $1,800

Liabilities recognized = $90,000

Amount paid for Principal and interest = $93,600

Interest reported on 2019 Income statement = 1800

Explanation:

Interest paid in cash in 2018 is zero because interest and principal were paid in cash on the maturity date.

Interest recognized in 2018 = 90000*0.08*3/12 = $1800

liabilities are recognized at original amount because the interest is not capitalized and no payment made thus far.

Amount paid on maturity date is 93,600 ( 90000 principal, 3600 interest)

interest reported is for three months jan - march

7 0
3 years ago
Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit of product. Durin
fenix001 [56]

Answer:

actual quantity= 25,000 pounds

Explanation:

Giving the following information:

Standard quantity= 2 pounds per units

Production= 12,000 units

Direct material quantity variance= $5,000 unfavorable

Standard price= 120,000/(2*12,000)= $5

<u>To calculate the actual quantity used in production, we need to use the following formula:</u>

Direct material quantity variance= (standard quantity - actual quantity)*standard price

-5,000 = (24,000 - actual quantity)*5

-5,000 = 120,000 - 5actual quantity

125,000/5 = actual quantity

25,000 = actual quantity

6 0
2 years ago
A two-step binomial tree is used to value an option on the Australian dollar (AUD). The strike price is 1.00 USD per AUD and the
ser-zykov [4K]

Answer:

a.) The proportional up movement , u, for the currency can be calculated using the following formula:

u = eStd Dev * Square root of t

u = e0.06*square root of 0.25

u = 1.0305

b.) Probability of up movement, p , = (a - d) / (u - d)

where   a = ert where r = 0.025, t = 0.25

a = e0.025*0.25 = 1.0063

d = 1 / u = 1 / 1.3050 = 0.7663

p = (1.0063-0.7663) / (1.3050-0.7663)

p = 0.46

1-p = 1-0.46 = 0.54

c)  Price of an American Call Option on the currency : we use binomial tree for that , as follows: The amounts below line indicate the option price and figures above line indicate the underlying asset price which is 0.55555

3 0
3 years ago
Other questions:
  • The ____ the existing spot price relative to the strike price, the ____ valuable the call options will be.
    9·2 answers
  • The individuals at the International Fireplace Shoppe perform the following duties:Individual E Roles and Responsibilities:1. Ro
    11·1 answer
  • Getting paid bi weekly how many paychecks do i get , if i lose my job?
    13·2 answers
  • Jason Herman works part-time as a retail clerk at a local bookstore. One night while his manager was out of town, Jason decided
    10·2 answers
  • An accounting report that shows the changes in capital during the accounting period is a
    5·2 answers
  • Your friend hopes to expand her business to multiple locations. It would be best for her to create a1. limited liability company
    9·1 answer
  • If money going out of the business is greater than the money coming into the business, what happens?
    10·1 answer
  • The VP of Sales is using Collaborative Forecasting to track sales rep quote attainment. The VP wants to be notified when sales r
    9·1 answer
  • All else being equal, an overseas source with lower production cost will become relatively more attractive as
    12·1 answer
  • According to Guy Kawasaki, intelligent, deep, complete, empowering, and elegant are qualities of curve-jumping products Select o
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!