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evablogger [386]
2 years ago
10

Two companies, A and B, both have $1 million in assets, earnings before interest and taxes (EBIT) of $160,000, and the same tax

rate. Company A is all equity financed, and Company B is 50% debt financed and 50% equity financed. If Company B's pretax cost of debt is 8%, then Company A will have a ROA that is _____ and a ROE that is _____ than Company B's. a. Option D b. Option C c. Option B d. Option A
Business
1 answer:
Paladinen [302]2 years ago
5 0

Answer: higher; lower

Explanation:

EBIT for A = 160,000

Equity of A = 1,000,000

ROA of A = 160,000/1,000,000 = 0.16 = 16%

ROE of A = 160,000/1,000,000 = 0.16 = 16%

EBIT for B = 160000 - (1000000 × 50% × 8%) = 120000

Equity of B = 1000000 × 50% = 500,000

ROA of B = 120000/1000000 = 0.12 = 12%

ROE of B = 120000/500000 = 0.24 = 24%

From the above, we can see that Company A has a higher ROA but had a lesser ROE THAN B

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Borchardt Corporation has provided the following data concerning last month’s operations. Direct materials $ 29,000 Direct labor
skad [1K]

Answer: $178,000

Explanation:

The following information can be derived from the question:

We have to first calculate the total manufacturing cost. This will be:

Direct material 29000

Add: Direct labor 58000

Add: manufacturing overhead 82000

Then the manufacturing cost will be:

= 29000 + 58000 + 82000

= 169000

We then add the beginning work in progress and then subtract the ending work in progress. This will be:

Manufacturing cost = 169000

Add: Beginning WIP = 66000

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= 169000 + 66000 - 57000

= $178,000

7 0
3 years ago
Enter mia profit/loss for the 2 month
Tems11 [23]
She profits more each month
8 0
3 years ago
Suppose a publisher faces the following costs of producing 10,000 newspapers each month: $5,500 cost of labor; $2,200 monthly mo
HACTEHA [7]

Answer:

Variable cost = $6,550

Explanation:

Variable cost is the cost incurred during the production process that changes with quantity of goods produced. For example labor, machine operating cost, and raw materials.

The other type of cost is variable cost that does not change with volume of production, but rather remains constant. For example rent, tax, and so on.

In the given instance the costs that are variable are cost of labor, cost of electricity to run printing presses, and cost of ink for paper.

Monthly mortgage and property tax are fixed cost that must be paid regardless of production volume.

variable cost = $5,500 + $800 + $250

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3 0
3 years ago
Tommy’s Tile Service is planning on purchasing new tile cleaning equipment that will improve their ability to remove tough stain
sergejj [24]

Answer:

1. $132,800

2. $531,200

3. $1,071,200

Explanation:

The break-even point is the level of sales at which the business incur no profit no loss.Fixed and variable costs are covered at this level of sales. Use following formula of break-even to calculate the fixed cost.

Break-even point = Fixed cost / Contribution margin ratio

$487,200 = Fixed cost / 25%

Fixed Cost = $487,200 x 25% = $121,800

1.

Revised Fixed cost = $121,800 + $11,000 = $132,800

2.

New Break-even point = $132,800 / 25% = $531,200

3.

Desired profit = $135,000

Desired revenue = ( Desired profit + Fixed cost ) /Contribution margin ratio = ( $135,000 + 132,800 ) / 25% = 267,800 / 25% = $1,071,200

5 0
3 years ago
List and describe the four basic rights in the private enterprise system
Elodia [21]

Private property

competition

profits

and freedom of choice


8 0
3 years ago
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