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JulsSmile [24]
3 years ago
6

Suppose your company needs $43 million to build a new assembly line. Your target debt-equity ratio is .65. The flotation cost fo

r new equity is 6 percent and the flotation cost for debt is 2 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What do you think about the rationale behind borrowing the entire amount?
Business
1 answer:
elena-14-01-66 [18.8K]3 years ago
6 0

Answer: See explanation

Explanation:

Debt = 0.65

Weight = 39.39%

Cost for debt = 2%

Product = 39.39% × 2%

= 0.3939 × 0.02

= 0.007878

Equity = 1.00

Weight = 60.61%

Cost for equity = 6%

Product = 60.61% × 6%

= 0.6061 × 0.06

= 0.036366

Weighted average floatation cost:

= 0.007878 + 0.036366

= 0.044244

= 4.42%

The true cost of the building will then be:

= Funds needed / (1 - Floatation cost)

= $43,000,000 / (1 - 0.044244)

= $43,000,000 / 0.955756

= $44,990,562

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Sales revenue is​ $725,700; allocated manufacturing overhead is​ $95,100; actual manufacturing overhead is​ $120,500; and cost o
yKpoI14uk [10]

Answer:

$320,000

Explanation:

if allocated overhead was $95,100 and actual overhead was $120,500, then overhead costs were under allocated by $25,400 (= $120,500 - $95,100) and that must be added to cost of goods sold in order to determine the actual gross profit.

total sales revenue = $725,700

<u>total COGS = $380,300 + $25,400 = ($405,700)</u>

gross profit = $320,000

8 0
3 years ago
When starting a business, more women choose ________ industries that tend to have lower average sales levels.
Zarrin [17]

When starting a business, more women choose service industries that tend to have lower average sales levels. Those industries that do not directly produce tangible things are known as service industries (such as agriculture and manufacturing).  The supply chain is the process through which items generated in the agricultural and manufacturing sectors are delivered to final customers.

Some service industries involved in this process include transportation, wholesale trade, and retail trade. Others are offered straight to customers. These include public administration, health care, education, information services, legal services, and financial services. Everything else falls under the category of service industries, which also includes banking, communications.

To learn more about industries, click here.

brainly.com/question/7721379

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4 0
1 year ago
On December 31, Year 1, Taylor, Inc. signed a binding agreement with a bank for the refinancing of an existing note payable sche
Scrat [10]

Answer

The note must be reported on the balance sheet as of December 31 for the total outstanding value, since the refinancing does not change the value to be paid only affects the terms and interests, also the financing will only be made in January of year 2

5 0
2 years ago
A(n) _____ is a strategy that guarantees a solution to a problem. subgoal
salantis [7]

Answer:

Algorithm

Explanation:

An algorithm can assist in solving organizational problems by setting standards that will aid in decision making. They are effective because they use statistical data and past information stored so that through artificial intelligence executives get data that surpasses human limitations. But it should be reviewed by IT professionals to avoid failures.

5 0
3 years ago
Forty Winks Corporation manufactures night stands. The production budget shows that Forty Winks Corporation plans to produce 1 c
Hunter-Best [27]

Answer:

$8,775

Explanation:

Forty Winks Corporation

March Night stand + April Night Stand × direct labour hours × direct labour rate.

$1,600+ $1,100 =$2,700

$2,700×0.25 direct labor hours =$675

$675×labor rate of $ 13.00=$8,775

The total combined direct labor cost that Forty Winks Corporation should budget in March and​ April is $8,775

6 0
2 years ago
Read 2 more answers
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