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Solnce55 [7]
2 years ago
8

20. WACC and NPV [LO3, 5] Sommer, Inc., is considering a project that will result

Business
1 answer:
g100num [7]2 years ago
8 0
Mark Brainliest please

Sommer Inc is considering the new project, and yet we have to calculate under what circumstances the company have to take on the project. In order to assess the project, we need to compute the break-even cost such as the present value of future cash flows and calculate the WACC weighted cost of capital. It measures the weighted cost of equity and the after tax cost of debt. The following information are given: Debt to equity ratio = 0.90 Cost of equity = 13% After-tax cost of debt = 4.8% After-tax cost of savings = $2.7 million Debt to equity ratio = Debt / Equity = 0.90 Therefore, Value of firm = value of debt + value of equity Value of firm = 0.90E + E Value of firm

See the calculation of WACC as attachment
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Answer:

Salesman

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3 years ago
Local Co. has sales of $ 10.1 million and cost of sales of $ 5.5 million. Its​ selling, general and administrative expenses are
Firlakuza [10]

Answer:

1. 45.5%

2. 13.3%

3. 7.2%

Explanation:

The formulas and calculations are shown below:

1. Gross margin = (Sales - cost of sales) ÷ (sales) × 100

                          = ($10.1 million - $5.5 million) ÷ ($10.1 million) × 100

                          =  ($4.6 million) ÷ ($10.1 million) × 100

                          = 45.5%

Gross profit = Sales - cost of sales

2. Operating margin = (Gross profit - selling, general and administrative expenses - research and development - annual depreciation charges) ÷ (sales) × 100

= ($4.6 million -  $460,000 or $0.46 million - $1.4 million - $1.4 million) ÷ ($10.1 million) × 100

= ($1.34 million) ÷ ($10.1 million) × 100

= 13.3%

Operating income = Gross profit - selling, general and administrative expenses - research and development - annual depreciation charges

3. Net profit margin = (Operating income - taxes) ÷ (sales) × 100

= ($1.34 million - $0.6097 million) ÷ ($10.1 million) × 100

= ($0.7303 million) ÷ ($10.1 million) × 100

= 7.2%

The income tax expense =  Operating income × income tax rate

                                          = $1.34 million × 45.5%

                                           = $0.6097 million

6 0
3 years ago
EB13.
damaskus [11]

Answer:

Product                  Selling price   Unit variable cost

                                       $                        $

Trunk switch                  60                     28

Gas door switch            75                      33

Glove box light              <u>40</u>                     <u> 22</u>

                                      <u> 175 </u>                   <u> 83</u>

Composite contribution margin

= Composite selling price - Composite unit variable cost

= $175 - $83

= $92

Composite contribution margin ratio

= <u>Composite contribution margin</u>

  Composite selling price

= <u>$92</u>

  $175

= 0.525714285

Composite break-even point in dollars

= <u>Fixed cost</u>

  Composite contribution margin ratio

=<u> $18,840</u>

  0.525714285

=  $35,837

Explanation:

In this case, there is need to add all the selling prices to obtain composite selling price. We also need to add all the unit variable costs to derive composite unit variable cost.

Composite contribution equals composite selling price minus composite unit variable cost.

Composite contribution margin ratio is the ratio of composite contribution to composite selling price.

Composite break-even point in dollars equal fixed cost divided by composite contribution margin ratio.

3 0
3 years ago
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