Answer:
a. Terrell's Optimal Capital Structure is 40:60. It means to obtain optimal capital structure in-order to increase value of firm, Terrell should finance 40% of its Assets through Debt and remaining through Common Equity.
b. The optimal Capital Structure is the point where company's WACC is minimized. So, 40:60 is the ratio where Terrell's WACC will be minimized.
Explanation:
The goal of Management is to increase Shareholders' wealth and not to generate profits because wealth is something that is for long-run whereas Profits are temporary. Management would accept projects having negative NPV if its goal is to maximize Profit.
Maximizing Shareholders' wealth means to increase the Share Price whereas Generating a higher EPS is Profit Maximization Strategy. So, you should look for that Capital Structure Point where the Company's Stock Price is Highest.
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Answer:
See below
Explanation:
With regards to the above, Jaheem's business profit increase is calculated as
= Fixed cost + Desired profit/Contribution margin
Given that;
Fixed cost = $400,000
Desire profit = $22,000
Contribution margin = $9.4
= $400,000 + $22,000/($24 - $14.6)
= $422,000/$9.4
= $44,894
Therefore, increase on profit
= $44,894 - $22,000
= $22,894
The government is an consumer because they trade with other countries to get goods that their country need and they are also a producer because they produce strategies for their government to make our communities around the world more better and advanced.
Answer:
d. 5.08%
Explanation:
We have to first calculate the YTM of the bond, and then apply the tax shield.
To get the YTM we have to calculate the rate of return of an annuity of 46.25 for 20 years compounding semiannually at IRR rate and the present value of the face value redeem in 20 years.
IRR = 0.084656891 (it should be done using financial calculator or excel or a similar software program)
then we apply the shield tax to the IRR:
IRR x (1 - tax-rate) = Cost of debt
0.084656891 * ( 1 - 0.4) = 5.0794= 5.08
Answer:
The price of the product is $59
Explanation:
Contribution margin is the net of the selling price and variable cost per unit. Contribution margin ratio is the ratio of contribution per unit to selling price per unit. As given below
Contribution margin ratio = Contribution margin per unit / Selling price per unit
23% = $13.57 / Selling price per unit
Selling price per unit = $13.57 / 23% = $59
