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cupoosta [38]
4 years ago
7

Sommer, Inc., is considering a project that will result in initial aftertax cash savings of $1.75 million at the end of the firs

t year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of .80, a cost of equity of 11.5 percent, and an aftertax cost of debt of 4.3 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 3 percent to the cost of capital for such risky projects.
Business
1 answer:
Alexeev081 [22]4 years ago
5 0

Answer:

The question is: "What is the maximum initial cost the company would be willing to pay for the project?"

The maximum initial investment cost the company would be willing to pay for the project is $18,817,204.

Explanation:

We have D/E = 0.8 => D/ (D+E) = 4/9; E/(D+E) = 5/9.

WACC of the firm = 4/9 x 4.3% + 5/9 x 11.5% = 8.3%.

Adjustment for cost capital due to higher risk of the project: 8.3% + 3% = 11.3%.

=> Maximum initial investment cost is equal to the net present value of the cash saving the project brings about discounting at project's cost of capital, calculated as:

1,750,000/ (11.3% - 2%) = $18,817,204.

Thus, the Maximum initial investment cost is $18,817,204.

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Answer: Evaluating Development Programs

Explanation:

Customer Appraisal is very and should be very important to companies because it is a critical source of information that guides a company on knowing Consumer Behavior.

Knowledge of Consumer Behavior can make or break a company as it enables them to know if they are satisfying their customer's needs.

Fostering Change, Holding Employees Accountable and Demonstrating a commitment to Customers are main reasons for Customer Appraisals. Evaluating Development Programs is not likely to be a reason so is the correct answer here.

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Answer:

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4 years ago
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Firdavs [7]
“Morals” I’m pretty sure is what you are looking for.
3 0
4 years ago
The economy of the gilded age was characterized by economic growth and high unemployment among unskilled workers. rapid economic
PolarNik [594]

Answer:

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Answer and Explanation: 1

The correct answer is (iii) slow economic growth and high unemployment among the middle class

In the US, glided age resembles the scenario prevailing in the last phase of 19th century. The primary feature of this age is the slower pace of economic growth. This indicates when the economy is least indulged in industries. Also, several people stay unemployed despite lying within middle-income classes. This is because if the people lying in the middle class are unemployed, then it could be understood that poverty would be extreme in an economy.

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2 years ago
Red Eye Shipping Inc. has purchased a business intelligence system. The main advantage of such a system is that it eliminates th
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