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olganol [36]
3 years ago
5

Sommer, Inc., is considering a project that will result in initial aftertax cash savings of $2.3 million at the end of the first

year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of .60, a cost of equity of 10 percent, and an aftertax cost of debt of 4.6 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.
Required:
What is the maximum inital cost the company would be willing to pay for the project?
Business
1 answer:
Anuta_ua [19.1K]3 years ago
6 0

Answer:

the maximum initial cost is 25.62674095 million

Explanation:

The computation of the maximum initial cost of the company is shown below:

But before that the discount rate is

= 0.6 ÷ 1.6 × 4.6% + 1 ÷ 1.6 × 10% + 3%

= 10.9750%

Now Maximum initial cost is

=2.3 ÷ (10.975% - 2%)

= 25.62674095 million

Hence, the maximum initial cost is 25.62674095 million

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Bertha purchased 10 shares of BestSnack, Inc. stock for $200 per share; in one year, she sold the 10 shares for $220 a share. Ov
geniusboy [140]

If the tax rate on nominal capital gain is 50%, how much tax does Bertha pay on her gain is: $97.

<h3>Gain</h3>

First step

Bertha's capital gain= ($220 - $200) x 10 shares

Capital gain = $200

Second step

Balance left after government took 50%

Balance left= $200 x (1 - 0.50)

Balance left= $100

Third step

Gain=$100 x (1 - 0.03)

Gain=$97

Therefore If the tax rate on nominal capital gain is 50%, how much tax does Bertha pay on her gain is: $97.

Learn more about Gain here:brainly.com/question/843074

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5 0
2 years ago
Which one of the following statements is not true? Group of answer choices Total fixed costs remain the same regardless of volum
Andre45 [30]

Answer:

The correct answer is letter "D": Total variable costs decrease as the volume increases.

Explanation:

Total fixed costs are those that do not vary when the volume of production changes. However, unitary fixed costs change with fluctuations in production. As production increases, unitary fixed costs decrease and if production decreases unitary fixed costs increase.

Also, unitary variable costs remain the same in front of changes in output but total variable costs change directly proportional to variations in production.<em> It means if the volume in production increase so will total variable costs and vice versa.</em>

3 0
3 years ago
If the marginal product of labor is increasing, the marginal cost of output must be
SVETLANKA909090 [29]
Your answer would be, If the Marginal Product of labor increases/rises, The Marginal Cost of Output FALLS.



If the Marginal Product of labor Falls, The Marginal Cost of Output RISES.



Hope that helps!!!
4 0
4 years ago
Rodarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermin
maksim [4K]

Answer:

$329 unfavorable

Explanation:

The fixed manufacturing overhead volume variance shows how much the actual production differs from the budgeted production.

Fixed manufacturing overhead volume variance is computed as;

= Actual output at budgeted rate - Budgeted fixed overhead

= (4,830 × $4.70) - ($4.70 × 4,900)

= $22,701 - $23030

= $329 unfavorable

Therefore, the overall fixed manufacturing volume variance for the month is $329 unfavorable

7 0
3 years ago
How did interchangeable parts revolutionize the manufacturing process
kodGreya [7K]

The creation of interchangeable parts allowed relatively unskilled workers to complete the production process, which allowed for mass production. Additionally, interchangeable parts made repairs and replacements easier and cheaper.

8 0
4 years ago
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