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3 years ago

Give an example of financial leverage, define it and explain how financial leverage works

1 answer:

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Example: A company spends $5 million to buy prime real estate on which to build a new manufacturing factory. The land is worth $5 million. This is not financial leverage because the corporation is not using borrowed funds to purchase the land.
If the same corporation spent $2.5 million of its own money and $2.5 million in borrowed funds to purchase the same piece of real estate, the company is utilizing financial leverage.

Define: the utilization of fixed expenditures to increase the expected risk and potential return

Explanation: When purchasing assets, the corporation has three alternatives for financing: stock, debt, and leases. Apart from equity, the remaining choices have fixed costs that are lower than the expected income from the asset.

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Stanley Corporation manufactures an electronic switch for dishwashers. The cost base per unit, excluding selling and administrat

sammy [17]

Answer:

So markup percentage will be 8 % on total unit cost

Explanation:

We have given that cost base per unit including selling and administrative expenses is $60

per unit cost of selling and and administrative expenses is $15

The company desired ROI per unit is $6

We have to calculate the markup percentage on total unit cost

Markup percentage on total unit cost is given by '

markup percentage = $\frac{desired\ ROI}{cost\ base\ per\ unit+ The \ per\ unit \ cost \ of \ selling \ and \ administrative\ expense}=\frac{6}{60+15}=0.08=8%$

So markup percentage will be 8 % on total unit cost

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3 years ago

The Marketing Control Statement is a valuable statement for marketers because it only utilizes costs that the marketer can contr

pishuonlain [190]

Answer: True

Explanation:

The Marketing Control Statement is quite beneficial to marketers as it avoids fixed costs and shows them the variable and programmed costs both of which can be controlled. This enables them to know what they need to and can change in a way that they can come up with an optimal marketing mix to ensure profitability.

It is also a very uncomplicated statement to prepare which further ingratiates it to marketers who would like to avoid all the jargon of income statements.

3 0

3 years ago

The United States Airlines Transports how many passengers daily?

SashulF [63]

Answer:

In the United States, the average number of passengers flying per day is 1.73 million.

I think the answer is C

6 0

3 years ago

Machida Inc. is considering a project that is expected to produce cash inflows of $3,200 per year in years 1-4, with a final cas

PolarNik [594]

Answer:

The NPV = $1578.185602 rounded off to $1578.19

As the NPV is positive, the project should be accepted.

Explanation:

The Net Present Value or NPV is a tool used to evaluate projects. It is used with various other tools to decide whether to undertake a project or not. To calculate the Net Present Value or NPV, we take the present value of the cash inflows provided by the project and deduct the initial cost of the project. If the NPV is positive, we should proceed with the project and vice versa.

NPV = CF1 / (1+r) + CF2 / (1+r)^2 + ... + CFn / (1+r)^n - Initial Cost

Where,

CF1, CF2, ... represents cash flow in Year 1, Year 2 and so on.

r is the required rate of return

NPV = 3200 / (1+0.17) + 3200 (1+0.17)^2 + 3200 (1+0.17)^3 +

3200 (1+0.17)^4 + 5700 (1+0.17)^5 - 9800

NPV = $1578.185602 rounded off to $1578.19

4 0

3 years ago

Ruston Company had Net Income for 2020 of $6,200,000. The firm invested $4,000,000 in manufacturing equipment during 2020. The e

Aloiza [94]

Answer:

$3,000,000

Explanation:

Calculation to determine the Net Cash Flow in 2020

STATEMENT OF CASH FLOW

For the Year 2020

Cash flow from operating Activities:

Net Income $6,200,000

Add Depreciation Expense $ 800,000

Net Cash provided by operating activities $7,000,000

($6,200,000+$800,000)

Cash flow from Investing activities:

Investment in Equipment ($4,000,000)

Net Cash used in Investing activities ($4,000,000)

Net Cash flow in 2020 $3,000,000

Depreciation under Straight Line method = (Cost - Salvage Value)/Useful Life

Depreciation under Straight Line method= (4000000-0)/5

Depreciation under Straight Line method= 800,000

Therefore the Net Cash Flow in 2020 is $3,000,000

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3 years ago