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notka56 [123]
2 years ago
11

The current market value of the assets of ABCD is $86.28 million. The call option value on the firm's assets is $53.09 million.

What is the market value of the firm's debt
Business
1 answer:
Temka [501]2 years ago
6 0

Answer: $33.19 million

Explanation:

From the question, we are informed that the current market value of the assets of ABCD is $86.28 million and that the call option value on the firm's assets is $53.09 million.

The market value of the firm's debt will be the difference between the market value of assets and the call option value of the firm's assets. This will be:

= $86.28m - $53.09m

= $33.19 million

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Roman55 [17]

Adam Smith was the first

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3 years ago
An asset falling under the MACRS five-year class was purchased three years ago for $200,000 (its original depreciation basis). C
Nitella [24]

Answer:

(a) The cash flows is $59,040.

(b) The cash flows is $71,040.

Explanation:

From the  Modified Accelerated Cost Recovery System (MACRS) Tables, the depreciation rates for the first 3 years for an asset falling under the MACRS five-year class are 20%, 32% and 19.2%. Therefore, we have:

Accumulated depreciation rate = 20% + 32% + 19.2% = 71.20%

Accumulated depreciation = Cost of the asset * Accumulated depreciation rate =  $200,000 * 71.20% = $142,400

Net book value of the asset = Cost of the asset - Accumulated depreciation = $200,000 - $142,400 = $57,600

We can now proceed as follows:

(a) Calculate the cash flows if the asset is sold now at $60,000

Capital gains = Sales proceeds - Net book value = $60,000 - $57,600 = $2,400

Capital gains tax = Capital gains * Tax rate = $2,400 * 40% = $960

Net sales proceeds = Sales proceeds - Capital gains tax = $60,000 - $960 = $59,040

Therefore, the cash flows is $59,040 net sales proceeds.

(b) Calculate the cash flows if the asset is sold now at $80,000

Capital gains = Sales proceeds - Net book value = $80,000 - $57,600 = $22,400

Capital gains tax = Capital gains * Tax rate = $22,400 * 40% = $8,960

Net sales proceeds = Sales proceeds - Capital gains tax = $80,000 - $8,960 = $71,040

Therefore, the cash flows is $71,040 net sales proceeds.

3 0
3 years ago
If earnings are expected to grow at a constant rate over time of 0.03 and investors' rate of discount is constant at 0.04, and i
Usimov [2.4K]

Answer:

The answer is $15,656

Explanation:

Formular: P = D * \frac{1 + g}{k - g}

P represent estimated stock price or value = ?

D represent last dividend paid = $152

k represent discount rate = 0.04

g represent growth rate = 0.03

Using the fomular above; P = $152 * \frac{1 + 0.03}{0.04 - 0.03}

P = $152 * \frac{1.03}{0.01}

P = $152 * 103 = $15,656

:. The fundamental value of the stock market would be $15,656

7 0
3 years ago
Knight Company reports the following costs and expenses in May. Factory utilities $16,120 Direct labor $69,685 Depreciation on f
GarryVolchara [31]

Answer:

a. $180,850

b. $390,269

c. $74,837

Explanation:

a. The computation of the manufacturing overhead is shown below:

= Factory utilities  + Depreciation on factory equipment + Property taxes on factory building  + Indirect factory labor  + Indirect materials + Factory repairs+ Factory manager salary

=  $16,120  + $13,703 + $2,894 + $52,814 + $83,926 + $3,044  + $8,349

= $180,850

b. The computation of the product cost is shown below:

= Direct materials used + Direct labor +  manufacturing overhead

= $139,734 + $69,685 + $180,850

= $390,269

c. The computation of the period cost is shown below:

= Sales salaries + Depreciation on delivery trucks + Repairs to office equipment +  Advertising + Office supplies used

= $49,631 + $4,044 + $2,185 + $15,670 + $3,307

= $74,837

7 0
2 years ago
What are some arguments in favor of raising the minimum wage? On the other hand, what are some arguments against raising the min
Ede4ka [16]

Answer:

Explanation:

The main argument in favor regarding increasing minimum wage is that a higher wage will result into an increase in the standard of living of the people. Furthermore, a rise in the minimum wage can help in lifting people out I poverty. Due to higher wages and salaries, workers will have more money to cater for their families and meet their needs. Lastly, an increase in the minimum wage means that the government can reduce its expenditures on helping the low income earners and can therefore invest the money in other critical sectors of the economy.

The arguments against raising the minimum wage is that it can lead to inflation. Inflation in the rise in the price for goods and services. When there's an increase in minimum wage, sellers may increase the price of goods as there'll be more money to spend by households. Also, it can lead to losses of jobs as employersay have to cut down cost on order to be able to increase the wages of some workers and thereby may result in some workers being laid off.

Minimum wages lead to the reduction in the entry-level jobs that are available, and reduces the change of entry level graduates to get training, and lifetime income. According to Economists, minimum wages will result into decrease in the employment opportunities that are available for the youths and thereby create unemployment. Potential employees will miss out on the training that should have been done at the initial stage one is entering an organization.

3 0
3 years ago
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