All of the following are insurable risks EXCEPT

A project is expected to generate annual revenues of $132,100, with variable costs of $80,200, and fixed costs of $20,700. The a

Ludmilka [50]

Answer:

$21,943

Explanation:

Calculation to determine the annual operating cash flow

Using this formula

Operating Cash Flow =(Annual Revenue-Variable costs - Fixed costs)×(1-Tax rate)+( Annual depreciation×Tax rate )

Let plug in the formula

Operating Cash Flow =[ ($132,100 - $80,200 - $20,700) x (1 - 0.35)]+ ($4,750 x 0.35)

Operating Cash Flow =

Operating Cash Flow =($31,200×0.65)+$1,663

Operating Cash Flow =$20,280+$1,663

Operating Cash Flow =$21,943

Therefore the annual operating cash flow is $21,943

7 0

3 years ago

Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing?

scoray [572]

The governmental action which would eliminate some or all of the inefficiencies that results from monopoly pricing is; Choice B; Prohibiting the monopoly from price discrimination.

Discussion:

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider(monopoly) in different markets.

In essence, when the government prohibits the monopoly from price discriminating, some of the inefficiencies of monopoly are eliminated.

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6 0

3 years ago

Over the last two decades the reduced importance of certain institutions in the primary mortgage market has been largely offset

Alinara [238K]

Answer:

Thrifts role have decreased whereas, mortgage and commercial banks roles have increased.

Explanation:

In simple words, Credit unions and cooperative savings banks are examples of thrifts that offer a multitude of deposits and lending services. Thrifts are different from conventional institutions in that organizations may draw money through the Federal Home Loan Bank Network, allowing them to charge greater interest to its members.

The ease of doing business and less documentation with commercial banks promoted their growth.

8 0

3 years ago

Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is earning positive econo

AleksandrR [38]

Answer: Given, the ball bearing market is purely competitive. Also at the current stage the firms in this market are earning positive economic profits.

Therefore , in the long run as adjustments occur in the industry, we can expect the market price of ball bearings to decrease and individual firms' profits to decrease.

This will take place as new firms will enter the market once they analyze that the existing firms are earning positive economic profits. Thus this will lead to decrease in price of ball bearing and further will lead to decrease in profit os a firm.

Therefore, the correct option is (d)

3 0

4 years ago

Titan Mining Corporation has 6.3 million shares of common stock outstanding, 220,000 shares of 3.6 percent preferred stock outst

Shkiper50 [21]

The firm’s market value capital structure is $503,910,000.

The rate the firm should use to discount the project’s cash flows is 9.33%.

a.

We will begin by finding the market value of each type of financing. We find:

Market value of debt = MVD = 105,000*($1,000)*(1.07) = $25,750,000

Market value of preferred cost = MVP = 220,000*($83) = $18,260,000

Market value of equity = MVE = 6,300,000*($73) = $459,900,000

And the total market value of the firm is:

V = $25,750,000 + 18,260,000+ 459,900,000

V = $503,910,000

b.

So, the market value weights of the company's financing are:

D/V = $25,750,000/$503,910,000 = 0.0511

P/V = $18,260,000/$503,910,000 = 0.0362

E/V = $459,900,000/$503,910,000 = 0.9127

For projects equally as risky as the firm itself, the WACC should be used as the discount rate.

First, we can find the cost of equity using the CAPM. The cost of equity is:

RE = .031 + 1.15(.071)

RE = 0.1030, or 10.03%

The cost of debt is the YTM of the bonds, so:

P0 = $1,070 = $26.50(PVIFAR%,34) + $1,000(PVIFR%,34)

R = 2.228%

YTM = 2.228% × 2

YTM = 4.46%

And the aftertax cost of debt is:

RD = (1 - .22)(.0446)

RD = .0348, or 3.48%

The cost of preferred stock is:

RP = $3.60/$73

RP = .0493, or 4.93%

Now we can calculate the WACC as:

WACC = 0.0511(.0348) + 0.0362(.0493) + 0.9127(.1003)

WACC =0.0933, or 9.33%

Hence, The firm’s market value capital structure is $503,910,000.

The rate the firm should use to discount the project’s cash flows is 9.33%.

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7 0

2 years ago