One difficulty in using voluntary transactions to internalize externalities is that: ____________

Beckett, Inc., has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are proje

FrozenT [24]

Answer:

Beckett, Inc.

Earnings Per Share:

a-1. Earnings Per Share:

Economic Conditions Normal Expansion Recession

Earnings before interest and taxes = $30,000 $35,400 $24,000

Earnings per share:

Recession = $24,000/8,000 $3.00

Normal = $30,000/8,000 $3.75

Expansion = $35,400/8,000 $4.43

a-2. Percentage changes in EPS:

Recession = -$0.75/$3.75 x 100 = -20%

Expansion = $0.68/$3.75 x 100 = 18.13%

b-1. EPS after recapitalization:

Economic Conditions Normal Expansion Recession

Earnings before interest and taxes = $30,000 $35,400 $24,000

Interest at 8% $8,000 $8,000 $8,000

Earnings after interest $22,000 $27,400 $16,000

Earnings per share:

Recession = $16,000/8,000 $2.00

Normal = $22,000/8,000 $2.75

Expansion = $27,400/8,000 $3.43

b-2. Percentage changes in EPS:

Recession: -$0.75/$2.75 x 100 = -27.27%

Expansion: $0.68/$2.75 x 100 = 24.73%

Explanation:

1. Data:

Market Value = $200,000

Economic Conditions Normal Expansion Recession

Earnings before interest and taxes = $30,000 $35,400 $24,000

Issue of debt for $75,000 with 8% interest

Proceeds to repurchase shares of stock.

Outstanding shares = 8,000

Ignore taxes

5 0

3 years ago

How widely used are private correctional companies to operate jails?

Kobotan [32]

Not very, most of the time CO’s are underpaid so they can have mass amounts of them.

7 0

3 years ago

Margin of Safety Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $4

valina [46]

Answer:

Margin of safety - Units =3350

Margin of safety - Sales Revenue = $251250

Explanation:

Margin of Safety indicates how much sales may decrease before a loss can be made.

Margin of safety - Units

Margin of safety - Units = 5000-1650 =3350

Margin of Safety as a % = 3350/5000 ×100 = 67%

Margin of safety - Sales Revenue

Expected Sales = (5000 × $75) =$375000

Margin of Safety = $375000 × 67% = $251250

3 0

3 years ago

What is the optimal method for procuring inputs that have well-defined and measurable quality specifications and require highly

BaLLatris [955]

Optimal procurement: input well-defined and measurable quality ... A type of exchange that occurs when the parties to a transcation have made specialized investments. .... make spot exchange an unattractivemethod of procurement due to ...

6 0

3 years ago

If you put $2,620 in a savings account and make no further deposits, what type of calculation would provide you with the value o

riadik2000 [5.3K]

Answer:

future value of a lump sum:

$Nominal(1+r)^n = FV\\2,620(1+r)^{28} = FV$

Explanation:

when there is only a single deposits the formula will be the compounding interest future value of a lump sum

The deposits will generate incoem at a given rate r which, will make it increase their value over the course of time.

3 0

3 years ago

One difficulty in using voluntary transactions to internalize externalities is that: _____________