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grandymaker [24]
3 years ago
10

Money, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are project

ed to be $26,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percent higher. If there is a recession, then EBIT will be 20 percent lower. Money is considering a $150,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 15,000 shares outstanding. Ignore taxes for this problem.
a. Calculate earnings per share, EPS, under each of the three economic scenarios (recession, normal, expansion) before any debt is issued.

b. Calculate the percentage changes in EPS when the economy expands or enters a recession.

c. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.

d. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession.

Business
1 answer:
lara31 [8.8K]3 years ago
7 0

Answer:

a. Calculate earnings per share, EPS, under each of the three economic scenarios (recession, normal, expansion) before any debt is issued. = 1.38667

b. Calculate the percentage changes in EPS when the economy expands or enters a recession. = -20.00%

c. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. = 1.56444

d. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. = -37.14%

Explanation:

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The city of Brock’s Water Enterprise Fund leases water treatment equipment. The life of the noncancellable lease is 10 years, an
Degger [83]

<u>Solution and Explanation:</u>

The Journal Entries in the books of Brock's water enterprise is as follows :-

Date  Particulars and details                             Debit($)  Credit($)

Jan 5, 2018  Intangible Assets - Lease  905861  

Lease Payable                                            905861

(Being Record the Lease)        

Jan 5, 2018  Lease Payable                  125000  

Cash                                                           125000

(Being Record Down Payment)        

Dec 31, 2018  Amortization Expenses ($905861divide 10)  90586  

Accumulated Amortization                                           90586

(Being Record the amortization)        

Jan 5, 2019  Lease Payable (\$ 125000-\$ 62469) 62531  

Interest Expenses ((\$ 905861-\$ 125000) * 8 \%)   62469  

Cash                                                                              125000

(Being Record the Second Lease Payment)  

3 0
3 years ago
Rex's doughnuts can produce only 100 doughnuts a day. the variable cost incurred per unit is $2 and fixed costs incurred per day
vladimir1956 [14]
The total cost that is incurred by producing 100 doughnuts is equal to the sum of the variable cost and the fixed cost. The total variable cost is,
    total variable cost = ($2/doughnut)(100 doughnuts) = $200

The total cost is,
   Total cost = total variable cost + total fixed cost
     TC = $200 + $500 = $700

Equating the cost and the revenue,
     TC = TR
     $700 = (100)(x)

The value of x from the equation is $7.

ANSWER: $7. 
3 0
3 years ago
Monopolist can produce at a constant average​ (and marginal) cost of
ankoles [38]
A monopolist can produce at a constant average (and marginal<span>) </span>cost of<span> AC = MC = $5</span>
8 0
3 years ago
How does Wanda's strategy of being a high-quality provider take advantage of the shifts in consumer demand for healthy dog treat
Katen [24]

Answer:

In the description section underneath the overview per the particular context is illustrated.

Explanation:

  • Wanda's philosophy about becoming a distributer of enhance performance resulted in increased market demand due to consumer perception that her goods are stronger and therefore more advantageous.
  • This contributes to consumption growth, moving the consumer surplus towards Wanda's goods to the right, contributing towards increased costs.
  • One more scenario maybe though in the immediate future, her Wanda commodities demonstrate no positive effects, resulting throughout a decline in terms of trade.

Throughout this situation, Wanda might answer by genuinely changing the productivity of the latter's goods including displaying a certain clinical significance to obtain a competitive advantage for customers.

7 0
3 years ago
What is a disadvantage of government bonds?
hjlf
None of those answers are suitable to me.

Government bonds are generally regarded as low-risk and they typically have modest (low) interest rates for return on investment, and these are advantages really. So we can discount answer A, C, and D.

I guess you could say that bonds can be hard to find (Answer B) but this not really true. There is always a bond market to trade bonds on. It requires setting up a trading account or speaking to a broker so this can be more difficult than putting money in a bank account, but to be honest I don't think any of those answers are appropriate for the question.
3 0
3 years ago
Read 2 more answers
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