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crimeas [40]
3 years ago
10

MM Proposition II with taxes: Group of answer choices explains how a firm's WACC increases with the use of financial leverage. r

eveals how utilizing the tax shield on debt causes an increase in the value of a firm. supports the argument that business risk is determined by the capital structure employed by a firm. supports the argument that the cost of equity decreases as the debt-equity ratio increases. reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.
Business
1 answer:
schepotkina [342]3 years ago
4 0

Answer:

explains how a firm's WACC increases with the use of financial leverage.

Explanation:

According to the MM Proposition II with taxes, the cost of equity rises with the increases use of debt in the capital structure of a firm.  

r_{e} = r_{o} +( r_{o}  - r_{d} ) × \frac{D}{E}

As cost of equity increases, the firm's WACC increases also

The  MM Proposition I with taxes reveals how utilizing the tax shield on debt causes an increase in the value of a firm

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Carol Beal is the export manager at Gudrun Sjoden USA, a licensed distributor for a Swedish designer. Carol has North America an
cupoosta [38]

Answer:

a. The buyer would cover all shipping and insurance costs and assume the risk at the factory door.

Explanation:

According to the given situation the exworks means that the seller fulfill his duty for delivering the goods when the goods are available at his place i.e. works, factory or warehouse to the buyer. Also the buyer would responisble to bear all the cost and the risk involved while taking the goods from the seller place to the final destination

Hence, the option a is correct

7 0
2 years ago
May 31, 2018 June 30, 2018
lana [24]

Answer:

a. If the company issued $10,000 of common stock and paid no dividends

Net income = $87,000 - $10,000

= $77,000

b. If the company issued no common stock but paid cash dividends of $3,000.

Net income = $87,000 + $3,000

= $90,000

c. company issued $12,500 of common stock and paid cash dividends of $30,000

Net income = $87,000 - $12,500 + $30,000

= $104,500

Explanation:

The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as

Assets = Liabilities + Equity

hence for May 31, 2018

$122,000 = $66,000 + Equity

Equity = $122,000 - $66,000

= $56,000

For June 30, 2018

$287,000 = $144,000 + Equity

Equity = $287,000 - $144,000

= $143,000

Difference in equity between the two dates

= $143,000 - $56,000

= $87,000

The equity is made up of common stock and retained earnings. The retained earnings is the accumulated balance of net income/loss over the period. This balance is reduced when dividend is paid to shareholders. Equity balance increases when shares are issued.

7 0
3 years ago
Dexter Industries purchased packaging equipment on January 8 for $98,000. The equipment was expected to have a useful life of th
Flauer [41]

Answer:

1.

a. $30,667

a.1. $92,001

b. $41,308

b.1. $92,000

c. $65,334

c.1. $94,370

2.The method that yields the highest depreciation on year 1 is Double declining balance, in the amount of $65,334

3. The method that yields the most depreciation the 3 years is Double declining balance in the total amount of $94,370

Explanation:

1. A (straight line method)

(98,000-6,000) / 3 years = 30,667

A.1. 30,667 x 3 years = 92,001

B. (Units-of-activity method)

Formula : [(cost - salvage value) x hours for the preiod] / total eatimated hours

[(98,000-6,000) x 8,980 ] / 20,000

41,308

B.1. Year 1

[(98,000 -6,000) x 8,980] / 20,000

41,308

Year 2

[(98,000-6,000) x 6,930] / 20,000

31,878

Year 3

[(98,000-6,000) x 4,090] / 20,000

18,814

Thus, 41,308 + 31,878 + 18,814 = 92,000

C. (double declining method)

formula : 100% / years x 2

100%/3 x 2 = 66.67%

98,000 x .66667 = 65,334

C.1. Year 1 = 65,334

Year 2

(98,000 - 65,334) x .66667 =21,777

Year 3

(98,000 - 65,334 - 21,777) x .66667 = 7,259

Thus, 65,334 + 21,777 + 7,259 =94,370

7 0
3 years ago
ou are a producer of cold medicine. Last month, a flood at your factory eliminated 50% of your firm’s production capability. At
Scilla [17]

Answer:

The flood shifts the supply to the left.

The increase in healthcare costs shifts the supply curve to the left.

Explanation:

An increase in the cost of production inputs (increase in health costs) or a decrease in the availability of resources (the flood reduced the firm's production capability), will shift the supply curve to the left.

A leftward shift of the supply curve will lower the quantity supplied and will increase the price of the good at every level of demand.

6 0
3 years ago
Sheffield Corp. has 285,000 shares of $8 par value common stock outstanding. It declares a 13% stock dividend on December 1 when
astra-53 [7]

Answer:

285,000 common stock outstanding with a $8 par value

it declares 13% stock dividend

market price at $16

since the stock dividend is considered small (less than 20%), we use the market price to record it

December 1, 202x stock dividends are declared (37,050 stocks)

Dr Retained earnings 592,800

    Cr Common stock dividends distributable 296,400

    Cr Additional paid in capital 296,400

December 31, 202x, distribution of stock dividends

Dr Common stock dividends distributable 296,400

    Cr Common stock 296,400

3 0
3 years ago
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