Answer and Explanation:
Without discounting :
Return on investment(ROI) for year 1 = -$100000
Return on investment(ROI) for year 2 = -$95000
Return on investment(ROI) for year 3 =-$50000
Return on investment(ROI) for year 4 =$10000
With discounting(PV/(1+r)^n):
Return on investment for year 1 = 0.93×-$100000= -$93000
Return on investment for year 2= 0.87×-$95000= -$82650
Return on investment for year 3 = 0.82×-$50000=-$41000
Return on investment for year 4=
0.76×$10000= $7600
Answer:
<em>Mark-up;</em>
Absorption costing=20%
Variable costing pricing = 26.7%
Explanation:
Absorption costing values production units using full cost per unit.
Full cost per unit= Direct material cost + Direct Labour cost + Variable production overhead+ Fixed production overhead
Absorption costing =18 + 22+ 27+13= 80
Mark-up = ROi/cost per unit× 100
= 16/80 ×100= 20%
Variable costing pricing
Here products are valued using the variable cost of production.
18 + 22+ 13+ 7= 60
Mark-up = 16/60× 100= 27%
Mark-up;
Absorption costing= 20%
Variable costing pricing =26.7%
Answer:
The equity of the levered firm is $6 million.
Explanation:
Firm U value = Value of unlevered firm = (EBIT * (100% - Tax rate )) / Unlevered cost of equity = (2 * (100% - 40%)) / 10% = $12 million
Firm L value = Value of levered firm = Value of unlevered firm + (Debt * Tax rate) = 12 + (10 * 40%) = $16 million
This implies that:
SL = Equity of the levered firm = Value of levered firm - Debt = $16 - $10 = $6 million
Therefore, the equity of the levered firm is $6 million.