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kicyunya [14]
3 years ago
9

Milton Industries expects free cash flow of $5 million each year. Milton's corporate tax rate is 35%, and its unlevered cost of

capital is 15%. The firm also has outstanding debt of $19.05 million, and it expects to maintain this level of debt permanently. What is the value of Milton Industries without leverage? What is the value of Milton Industries with leverage?
Business
1 answer:
bija089 [108]3 years ago
4 0

Answer:

1. $33.33 million

2. $40.00 million

Explanation:

The computation of the value of Milton Industries with leverage is shown below:-

Value of Milton Industries without leverage is

= Free cash flow ÷ unlevered cost of capital

= $5 million ÷ 0.15

= $33.33 million

Value of Milton Industries with leverage is

= Value of Milton Industries without leverage + Tax × Debt

= $33.33 million + 0.35 × $19.05 million

= $40.00 million

Therefore we have applied the above formula.

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Which of the following would most likely shift a production possibilities curve to the right?
MAXImum [283]

Answer:

 an improvement in the education level of the work force of a nation

Explanation:

The production possibility curve is a curve that shows the various quantities of two goods an economy can produce at a given level of technology and amount of labour force.

Factors that leads to an outward shift of the production possibility curve;

1. Increase in labour force

2. Increase in education level of the Labour force

3. Technological advancement

Shifting resources from the production of one good to the production of another leads to a movement along the production possibility curve.

I hope my answer helps you

5 0
3 years ago
Knowledge Check 01 Zeta Corporation issues $100,000 of 8% bonds maturing in 10 years on January 1, Year 1, when the market rate
alexandr1967 [171]

Answer:

$106,595

Explanation:

Given:

Initial market rate = 9%

Dropped market interest rate, r = 7% per year

or

= 7% × [6 ÷ 12]

= 3.5% = 0.035

Remaining time, n = 9 years = 18 semi annual periods

Now,

Value of the bond at the retirement

= [ PVAF × Interest payment] + [ PVF × face value]

here,

Present value of annuity factor, PVAF = \frac{1 -(1+r) ^{-n}}{r}

or

PVAF = \frac{1 -(1+0.035) ^{-18}}{0.035}

or

PVAF = 13.189

And,

Interest payment = $100,000 × 8% × [6 ÷ 12 ]              [since, 8% bonds]

= $4000

Present value factor = \frac{1}{1.035^{18}}

= 0.538

par value = $100,000

= [13.189 × $40] + [0.538 × 100,000]

= 52,758.7316 + 53,836.114

= $106,595

Hence,

The correct answer is option $106,595

8 0
3 years ago
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Answer:

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2 years ago
A way that traditional retailers can compete with online retailers is to: Multiple choice question. use franchises that deliver
Arisa [49]

In order to compete with the online retailers, the traditional retailers can use franchises that deliver, require an administered system for all, and increase their market share.

<h3>Who is a retailer?</h3>

A manager or owner of a business organization or a unit that specializes in selling of products to their customers, which they procure from the supplier, is known as a retailer.

Hence, options A, C and D hold true regarding the traditional retailers.

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7 0
2 years ago
Which statement reports the changes in shareholders' equity during the period that were not a result of transactions by owners.
guajiro [1.7K]

Answer:

the statement of comprehensive income

Explanation:

The statement of comprehensive income refers to a summary in which the net assets are to be recognized for a particular period of time. It shows the adjustments made to the equity that would be highlighted also. Plus the net income could be determined by preparing an income statement

Therefore in the given case, the changes that are made in the stockholder equity would be come under the comprehensive income statement and the same is to be considered

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