Answer:
$36,000 increase
Explanation:
For computing the increase or decrease in income, first we have to determine the net cash outflow which is shown below:
Net cash outflow = Purchase of new spotter truck - sale value of old truck
= $120,000 - $31,000
= $89,000
Now the increase or decrease would be
= Variable manufacturing cost for five years - net cash outflow
= $25,000 × 5 years - $89,000
= $125,000 - $89,000
= $36,000 increase
Answer:
B) value of the levered company will exceed the value of the unlevered company.
Answer:
Explanation:
The journal entry is shown below:
Account receivable A/c Dr $593,850
To Sales tax payable A/c $58,850 ($535,000 × 11%)
To Sales revenue A/c $535,000
(Being sale is made on credit)
The account receivable amount includes both the sales tax payable and the sales revenue amount.
Answer:
The price of the stock one year from today is $37.45
Explanation:
The expected dividend that is the dividend for the next period of D1 is given as 2.8. To calculate the value of the stock one year from now, we need to use D2 in our calculations.
The formula to find the price of a stock that has a constant dividend growth is,
P0 = D0 * (1+g) / r - g
This is to calculate the pricce of the stock today. To calculate the price of the stock one year from today, we need to use D2 in our calculations.
Where, D2 = D1 * (1+g)
Thus, the price of the stock one year from today or P1 is
P1 = 2.8 * (1+0.07) / 0.15 - 0.07 = $37.45