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vodomira [7]
3 years ago
9

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market

value basis. KJM Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par) $10,000,000 Preferred stock 2,000,000 Common stock ($10 par) 10,000,000 Retained earnings 4,000,000 Total debt and equity $26,000,000 The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt
Business
1 answer:
vampirchik [111]3 years ago
8 0

Answer:

$5,412,000

Explanation:

The semi annual interest = $20

Periods (n) till maturity are 10*2 = 20

Discounting rate is 12%/2 = 6%

Principal amount is $1,000

Market Value = 20 * PVIFA (20,6%) + 1,000 * PVIF (20,6%)

Market Value = 20 * 11.4699 + 1,000 * 0.3118

Market Value = 229.398 + 311.8

Market Value = 541.198

Market value = $541.20

Number of bonds = 10,000,000/1,000

Number of bonds = 10,000

Current market value = Number of bonds * Market value

Current market value = 10,000 * 541.20

Current market value = $5,412,000

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The Goodyear Tire & Rubber Company's December 31, 2016, financial statements reported the following (in millions). Cash Dece
Gnom [1K]

Answer:

A. $1,476 million.

Explanation:

Cash at beginning of the year + cash from operating activities + Cash from investing activities + cash from financing activities

Cash at beginning of the year + $1,504 -$973 -$875 = $1132

Cash at beginning of the year - $344 = $1132

Cash at the beginning of the year = $1132 + $344

Cash at the beginning of the year = $1,476 million

6 0
3 years ago
Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of u
Crazy boy [7]

Answer:

Results are below.

Explanation:

<u>First, we need to calculate the allocation rates:</u>

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Production setups= (73,000 / 30)= $2,433.33 per setup

Material handling= (49,000 / 91)= $538.46 per number of part  

Packaging costs= (246,000 / 156,000)= $1.58 per unit

<u>Now, we need to allocate costs to Product XY:</u>

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Production setups= 2,433.33*18= 43,799.94

Material handling= 538.46*23= 12,384.58

Packaging costs= 1.58*60,000= $94,800

Total allocated costs= $150,984.52

<u>Finally, per unit basis:</u>

Unitary cost= 150,984.52 /60,000= $0.27

8 0
3 years ago
Which of the following products is likely to require the most help from a sales person?
Nina [5.8K]

a house, duh, clothing can be hung and stored, potato chips are bagged, a magazine is almost useless, but a house needs plants trimmmed and rooms cleaned and taking care of bugs and such

7 0
3 years ago
Read 2 more answers
An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly reg
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Answer:

B.

Explanation:

The investor should consider that they may find that the restaurant's financial statements undervalue the true value of its resources. If this were to be the case then the investor would have made a lot of money since they would have paid face value for the restaurant when in actuality it was massively undervalued and is worth a lot more, meaning he would make a large profit on his investment from the beginning.

8 0
3 years ago
Suppose that, in a competitive market without government regulations, the equilibrium price of donuts is $1.00 each. Indicate wh
vodomira [7]

Answer:

1. Price ceiling, Binding

2. Price ceiling, Binding

3. Price floor, binding

Explanation:

Price ceiling is a government or group control limit on how high a product, commodity or service can be charged.

Price floor is a government or group limit on how low a product, commodity or service can be charged.

Binding simply means you are legally bound to something while non-binding means you are not legally bound to it.

8 0
3 years ago
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