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notka56 [123]
2 years ago
5

Medallion Cooling Systems, Inc., has total assets of $10,000,000, EBIT of $2,000,000, and preferred dividends of $200,000 and is

taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment:,
a. Calculate earnings per share for each level of indebtedness.,

b. Use Equation 13.12 and the earnings per share calculated in part a to calculate a price per share for each level of indebtedness.,

c. Choose the optimal capital structure. Justify your choice

Business
1 answer:
liraira [26]2 years ago
4 0

Answer:

Explanation:

The two attached pictures shows the explanation for this problem. I hope it help you. Thank you

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A different ethanol processing facility costs $800,000 to construct but will instead last forever.Every year (starting the year
iragen [17]

Answer:

r = 5%

Explanation:

Construction cost 800.000

# of barrels produced 10.000

Price per barrel $4

let the interest rate = r

Equate the net present value = 0

800000 = 10000 x 4/(1 + r) + 40000/(1 + r)2 + .......

800000 = 10000 x 4/r

r = 5%

8 0
2 years ago
Airbase is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In th
lapo4ka [179]

Answer: 4. a consumer electronics company popular among price-conscious customers.

Explanation: Companies who thread a cost-leadership strategy or path could be said to be 'price-centric', that is gives price huge cognizance and will strive to be a market or industry leader when it comes to giving best and most affordable prices on products.

Thus, since Airbase follows a cost leadership strategy and also popular among consumers for its affordable devices, it should also weigh or compare it's strategy to other consumer electronics company which is popular among consumers which gives cognizance to price of products they purchase.

5 0
3 years ago
Stock R has a beta of 2.5, Stock S has a beta of 0.55, the required return on an average stock is 13%, and the risk-free rate of
avanturin [10]

Answer:

19.50%

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

For Stock R

= 3% + 2.5 × (13% - 3%)

= 3% + 2.5 × 10%

= 3% + 25%

= 28.00%

For Stock S

= 3% + 0.55 × (13% - 3%)

= 3% + 0.55 × 10%

= 3% + 5.5%

= 8.50%

The difference would be

= 28% - 8.5%

= 19.50%

3 0
3 years ago
Which of the following is not true about credit cards
givi [52]
Can i see the answer choices
5 0
3 years ago
Effective annual rate: Raj Krishnan bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the deale
g100num [7]

Answer:

EAR = 5.01%

Explanation:

Given that

APR = 4.9% = 0.049

Loan amount = initial amount - deposited amount

= 17345 - 6000

= 11,345

PV = 11345

Frequency of compounding, m = 12

Recall that

EAR = (1 + r/m)^n - 1

Thus,

= (1 + 0.049/12)^12 - 1

= 1+ 0.049/12^12 - 1

= 1.0501 - 1

= 0.0501 ×100

= 5.01%

3 0
2 years ago
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