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ruslelena [56]
3 years ago
6

A regional restaurant chain, CoCo's, is considering purchasing a smaller chain, AJ's, which is currently financed using 20% debt

at a cost of 8%. CoCo's analysts project that the merger will result in incremental free cash flows and interest tax savings of $2 million in Year 1, $4 million in Year 2, $5 million in Year 3, and $117 million in Year 4. (The Year 4 cash flow includes a horizon value of $107 million.) The acquisition would be made immediately, if it is to be undertaken. AJ's pre-merger beta is 2.0, and its post-merger tax rate would be 34%. The risk-free rate is 8%, and the market risk premium is 4%. What is the appropriate rate for use in discounting the free cash flows and the interest tax savings
Business
1 answer:
max2010maxim [7]3 years ago
3 0

Answer:

13.856%

Explanation:

For computing the discounting rate we have to find out the weightage average cost of capital but before that first we have to determine the cost of equity and the after tax cost of debt which is shown below:

Cost of equity = Risk free rate of return + Beta × market risk premium

= 8% + 2 × 4%

= 16%

And, the after cost of debt is

= Cost of debt × ( 1 - tax rate)

= 8% × (1 - 0.34)

= 5.28%

Now the weighted cost of capital is

= Cost of debt × weighted of debt + cost of equity × weighted of equity

= 5.28% × 20% + 16% × 80%

= 1.056% + 12.8%

= 13.856%

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The product development team of a company conducts a meeting to discuss the worthiness of launching a new product in the market.
kumpel [21]

Answer:

The correct option is groupthink, option C

Explanation:

Synergy is combining individual efforts together in order to achieve more than it is possible individually, a concept of 2 plus 2 equals 5.Hence, the question is not about achieving more in a group, so it is not about synergy.

Groupthink is the concept of reasoning a single team where individual reasoning or creativity is subordinated to group thinking and sometimes leading sub-optimal decisions been made,that was exactly the case of Jeff and his team

7 0
3 years ago
Name two defferences between basic wants and secondary wants​
Katena32 [7]

Answer:

The answer is below

Explanation:

The difference between basic wants and secondary wants​ lies in how much humans want them in terms of survival.

Therefore, the two of the main differences between Basic wants and Secondary wants are:

1. Basic wants are wants of humans that are meant for survival or cannot do without while secondary wants are not meant for human survival or humans can do without.

2. Without Basic wants such as food, shelter, and oxygen, humans will die off quickly, while humans can easily survive without secondary wants such as entertainment activities.

4 0
3 years ago
8. In the month of September, Matlock Industries sold 800 units of product. The average sales price was $30. During the month, f
Lunna [17]

Answer:

(a) $9; 30%

(b) $21,000; 700 units

Explanation:

Given that,

Units sold = 800

Average sales price = $30

Fixed costs = $6,300

Variable costs = 70% of sales

(a) Contribution margin per unit:

= Selling price per unit - Variable cost per unit

= $30 - (70% × $30)

= $30 - $21

= $9

Contribution margin ratio:

= Contribution margin per unit ÷ Selling price

= $9 ÷ $30

= 30%

(b) Break-even sales (in dollars):

= Fixed costs ÷ Contribution margin ratio

= $6,300 ÷ 30%

= $21,000

Break-even sales (in units):

= Fixed costs ÷ Contribution margin per unit

= $6,300 ÷ $9

= 700 units

4 0
4 years ago
The nurse is assessing a patient's functional ability. which activities most closely match the definition of functional ability?
Sever21 [200]
When The nurse is assessing a patient's functional ability, the activities that <span> most closely match the definition of functional ability are: 
</span><span>-. Healthy individual works outside the home, use a cane, well groomed. 
- Healthy individual, college education, travels, can balance a checkbook

During the assessment, the nurse will assist the patient to do several activities that will most likely become the patient's routine</span>
5 0
3 years ago
You have just received notice that a customer of yours with an Account Receivable balance of $100 has gone bankrupt and will not
Ksivusya [100]

Answer:

debit allowance for doubtful debt $100

credit accounts receivable       $100

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

6 0
3 years ago
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