Answer:
c. 1.50%
Explanation:
The Hardwig, Inc is considering to pursue a relaxed or restricted current asset investment. We need to calculate the ROE for both the situations. The Net income in the both situation will be;
EBIT - Interest expense - Tax expense = Net Income
Restricted situation = $150,000 - 72,000 - 31,200 = $46,800
Relaxed situation = $150,000 - 81,818 - 27,273 = $40,909
ROE = Net income / equity
Relaxed situation = $40,909 / $818,180 = 5.00%
Restricted situation = $46,800 / $720,000 = 6.50%
The difference between both ROE = 1.50%
Answer:
Products Selling price Unit variable cost Contribution per unit
$ $ $
M 7 3 4
N 6 2 4
O 6 3 3
19 8 11
Break-even point in composite units
= <u>Total fixed cost</u>
Contribution per unit
= <u>$340,000</u>
$11
= 30,909 units
Break-even point for the current sales mix
M 3/6 x 30,909 units = 15,455 units
N 1/6 x 30,909 units = 5,151 units
O 2/6 x 30,909 units = 10,303 units
Explanation:
In this case, we need to calculate contribution per unit of each product by deducting the unit variable cost of each product from their respective selling prices. Then, we will obtain the break-even point in composite units by dividing the total fixed cost by overall contribution per unit.
Then, we will determine the break-even point for the current sales mix by multiplying the proportion of each product in the sales mix by the break-even point in composite units.
Answer:
The firm's optimal capital structure is 80% Debt and 20% Equity.
The WACC at this optimal capital structure is 10.28%.
Explanation:
Note: See the attached excel file the computation of the weighted average cost of capital (WACC) at the optimal capital structure. Also note that the data in the question are merged together but they are sorted in the attached excel file before answering the question.
The optimal capital structure of a firm can be described as a combination of debt and equity financing that is the beat in which market value of the firm is maximized while its cost of capital is minimized.
Using the weighted average cost of capital (WACC), the optimal capital cost capital structure occurs at a point where the WACC is the lowest.
From the attached excel file, the lowest WACC is 0.1028, or 10.28%. At this firm Market Debt- to-Value Ratio (wd) which is debt is 0.80 (i.e. 80%), and Market Equity-to-Value Ratio (ws) which is equity is 0.20 (i.e. 20%).
Therefore, the firm's optimal capital structure is 80% Debt and 20% Equity.
The WACC at this optimal capital structure is 10.28%.
<span>Coffee/ sugar cane / bananas
can grow on a small farm, lower startup costs and risks. Countries clear cut natural forests and wildlife to make room for these crops. without export, they cannot sustain the country.</span>
Answer:
The Journal entry is as follows:
Land A/c Dr. $400,850
To Cash A/c $100,850
To Notes payable $300,000
(To record purchase of land with cash and notes payable)
Workings:
Purchase price of land = $392,000
Total cost of land:
= Purchase price of land + Property taxes + Title insurance + Removal of building
= $392,000 + $2,100 + $950 + $5,800
= $400,850
