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Vanyuwa [196]
3 years ago
7

5) Scanlin, Inc. is considering a project that will result in initial aftertax cash savings of $2.1 million at the end of the fi

rst 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 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. Under what circumstances should the company take on the project
Business
1 answer:
rewona [7]3 years ago
4 0

Answer:

The PV of future cash flow is $22,925,764, therefore the company should take on the project

Explanation:

In order to know if the company should take on the project we have to calculate the PV of future cash flow as follows:

PV of future cash flow=<u>    D1    </u>

                                        RE-g

To calculate this formula we requre to calculate the WACC and the discount rate as follows:

WACC=(1.00/1.80×0.11)+0+(0.80/1.80×0.046)

WACC=0.0611+0+0.02044

WACC=0.081556

WACC=8.16%

After having calculated the WACC we can calculate the project discount rate as follows:

project discount rate=WACC + Additional risk factor

=8.16%+3%

=11.16%

Therefore, PV of future cash flow= <u>$2,100,000</u>

                                                            0.1116-0.02

PV of future cash flow= <u>$2,100,000</u>

                                            0.0916

PV of future cash flow=$22,925,764

The PV of future cash flow is $22,925,764, therefore the company should take on the project

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Employee morale at dos santos, inc., is very high. this type of informtaion is an example of:_______
Ad libitum [116K]

Employee morale at dos Santos, inc., is very high. this type of information is an example of <u>Qualitative Data</u>

<h3>Qualitative data: What are they?</h3>

Information that approximates and characterizes is what qualitative data are. Qualitative information can be observed and recorded. This particular data type is not numerical. This kind of information is gathered using focus groups, one-on-one interviews, observations, and similar techniques. In statistics, categorical data, or information that can be categorized based on the characteristics and traits of an object or phenomena, is often referred to as qualitative data.

It is frequently referred to as categorical data because qualitative data can be categorized.

Imagine a situation where a student reads aloud in class from a section of a book. A teacher who is listening to the reading offers feedback on the passage that the student read. An example of qualitative data is when a teacher gives feedback to a student without deducting points for fluency, intonation, word choice, or pronunciation clarity.

As a result, dos Santos, Inc. has exceptionally high employee morale. This kind of data is an illustration of qualitative data.

For more information on <u>Qualitative Data</u>, refer to the following link:

brainly.com/question/12929865

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3 0
1 year ago
Complete the statements on how to do a career search by correctly filling in the missing information
Triss [41]

Answer:

The correct answers would be Skills and Employment outlook respectively.

Explanation:

When you are about to choose a career that will be best suited to you, It would be best to find out your skills that would be required to perform the job effectively. A person must be aware of his skills and talents and then he has to search for the career accordingly, because this will determine whether the career is a good match with your skills or not. After this assessment, you should also look into the market trends for the job opportunities of the career that you are thinking to pursue. This will help you focus more on the career development and save your time to search for the job after completing the academic career in the non relevant field.

3 0
3 years ago
Read 2 more answers
Bear tracks, inc., has current assets of $2,180, net fixed assets of $9,400, current liabilities of $1,355, and long-term debt o
abruzzese [7]

(a) Total assets = Current assets + Fixed assets  

Total assets = 2180 +9400 = 11,580

Total liabilities = Current liabilities + long term debt

Total liabilities = 1355+3990 = 5,345

According t the accounting equation, Stockholders equity = Total assets - Total liabilities =  11,580-5,345 = 6,235

Stockholders equity = $6,235

(b) Working capital = Current assets - Current liabilities

Working Capital = 2180-1355

Working Capital = $825

3 0
3 years ago
Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%. Security "X" goes up on average by 29%
Alex

Answer:

The expected return on security with a beta of 0.8 is closest to 7.2%.

Explanation:

This can be determined as follows:

Since the return of security Z remains at 4% despite the change in the market, security Z is the risk-free asset.

Note that a risk free asset is an asset which its returns does not change with change in the market.

Using the Capital Asset Pricing Model (CAPM) formula, we have:

Er = Rf + (B * MPR) ............................................ (1)

Where;

ER = Expected return = ?

Rf = Risk-free rate = Rate of return of security z = 4%

B = Beta = 0.8

MPR = Market risk premium = Expected return on the market rate - Risk-free rate

Expected return on the market rate = (50% * 24%) + (50% *(-8%)) = 8%

Therefore, we have:

MPR = 8% - 4% = 4%

Substituting the values into equation (1), we have

Er = 4% + (0.8 * 4%)

Er = 0.072, or 7.2%

Therefore, the expected return on security with a beta of 0.8 is closest to 7.2%.

8 0
3 years ago
During 2004, Thor Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Thor had fixe
Diano4ka-milaya [45]

Answer:

d. $240.00

Explanation:

Calculation to determine what should the 2005 price be if Thor is to make the same $200,000 profit before income taxes?

2004 CM% = 12.5% ($15/$120)

2005 CM = $2,400,000 ($1,000,000 + $200,000)

2005 CM per unit = $2,400,000/80,000 units

2005 CM per unit= $30 CM per unit;

2005 selling price per unit = $30/.125

2005 selling price per unit= $240

Therefore what should the 2005 price be if Thor is to make the same $200,000 profit before income taxes is $240

6 0
2 years ago
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