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2 years ago

For a levered firm, flotation costs should

Business

1 answer:

KengaRu [80]2 years ago

5 0

Answer:

The answer is option B. For a levered firm, flotation costs should be spread over the life of a project, thereby reducing the cash flows for each year of the project.

Explanation:

When a company’s securities are listed on a public exchange, there is a general saying that securities are floated on the exchange. That is how the name flotation costs came about.

Flotation is actually the costs incurred by a company in issuing its securities to public. it is also called issuance costs.

Examples of Flotation costs include charges paid to the investment bankers, lawyers, accountants, registration fees of the securities regulator and the exchange on which the issue is to be listed.

Flotation cost would vary based on several factors, such as company’s size, issue size, issue type (debt vs equity),

In summary, Flotation costs are the cost a company incurs to issue new stock making new equity cost more than existing ones.

Business analysts argue that flotation costs are a one-time expense that should be adjusted out of future cash flows in order to not overstate the cost of capital forever.

It is based on this premise that i chose option B, which states that flotation costs be spread over the life of a project thereby reducing the cash flows for each year of the project at levered firms.

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The __________ is based on all the goods and services produced in the economy, which make it a current-weights index. eco203

podryga [215]

Answer:

The __Paasche Index or Current-Weighted Index_______ is based on all the goods and services produced in the economy, which make it a current-weights index.

Explanation:

The Current-Weighted Index is an index that calculates the weighted average of prices or quantities or with the weights used proportionate to the quantities or prices of the goods. At regular intervals, the weights have to re-calculated in line with the current realities. This regular re-calculation of the weights, which is the basis for its name, makes it current.

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3 years ago

Your parents put $300 into an account paying 11 percent interest for you when you were ten. Ten years later they tell you that y

Flauer [41]

Answer:

The balance in the account = $851.8

Explanation:

The future value of a lump sum is the amount expected at a future date when a sum of money is invested today at a particular rate of interest for certain number of years

This implies compounding the initial amount invested ($300) at the given interest rate(11%) for 10 years.This will be done as follows:

FV = PV × (1+r)^(n)

FV-Future value

r- rate of return per period

n- Number of period

PV - 300

r-11%

DATA

FV- ?

PV - 300

n- 10

FV= 300 × 1.11^10 = 851.83

The balance in the account = $851.8

3 0

3 years ago

The entity’s manufacturing division, whose assets constituted 75% of its total assets at September 30, Year 5 (end of year), was

belka [17]

The event should be presented in the financial statements as follows:

1. The assets side of the balance sheet will be reduced by 75%, with its accompanying accumulated depreciation.

2. The bonded liability on the balance sheet is eliminated by the relevant amount.

3. The journal entry should debit the Bonded Liability and accumulated depreciation, while the assets worth 75% are credited.

4. If the bonded indebtedness is more than 75% of the assets, the company records a profit on disposal on the income statement. Otherwise, it records a loss. If they are equal, there is no profit or loss.

Thus, the difference between the debit and credit entries constitutes either profit or loss on disposal.

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2 years ago

Cheshire Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce

densk [106]

Answer: Depreciation for the first year = 17825

Explanation:

Given:

Machine purchased for $125,000

Salvage value of $10,000

Output = 100,000

First year of operation, Output = 15500

First, we'll evaluate depreciation per unit over the entire life of the machine:

i.e. $Depreciation\ per\ unit = \frac{ Purchasing\ cost - Salvage\ value}{Total\ units\ produced}$

Depreciation per unit = $\frac{125000 - 10000}{100000}$

Depreciation per unit = 1.15

Now, we'll compute the depreciation for the first year:

Depreciation for the first year = Depreciation per unit × Output (first year)

Depreciation for the first year = 1.15 × 15500

Depreciation for the first year = 17825

7 0

2 years ago

Read 2 more answers

Leading others in cross-cultural situations is complicated. Which of the following is NOT one of the many reasons why such situa

Anastasy [175]

Leading others in cross-cultural situations is complicated. Styles of dress are NOT one of the many reasons why such situations can be complicated.

Cross-cultural communication is the practice of identifying both cultural groups' differences and commonalities in order to interact successfully within a particular situation.

You'll be able to express yourself with confidence and learn how to be patient with others who don't share your background if you develop cross-cultural communication skills. Additionally, it will provide you with a wonderful chance to interact with students from other countries and talk about your differences.

Learning the fundamentals of this sort of communication is the first step in overcoming obstacles and preventing misunderstandings in cross-cultural communication. These are openness, awareness, readiness, language, and humour.

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1 year ago