Answer: The cost of capital for a firm with no debt in its capital structure.
Explanation:
Leverage in finance refers to the use of debt. Unlevered capital therefore would refer to capital that is without debt which means that an unlevered cost of capital is one with no debt in its capital structure.
Companies with such a capital structure derive their capital 100% from Equity and as such do not pay interest. This means however, that they will not benefit from the tax shields that interest payments offer.
Harry is a citizen and resident of Saudi Arabia. During the current year, Harry never visits the United States, nor does he hold a green card. However, he realized a gain on the sale of Extel Corporation stock, a corporation organized in the United States. The United States does NOT have an income tax treaty with Saudi Arabia. What is the Source of Income and how does the U.S. tax the income
Answer:
The source of income is the capital gain realized when Harry sold the stocks of Extel Corporation. Generally, nonresident aliens (like Harry) are subject to a 30% tax on all their US income sources. E.g. if Harry made a capital gain of $1,000 when he sold the stocks, he will need to pay $300 to the IRS.
Some exemptions apply to foreign students, resident aliens or people that work for foreign governments, but Harry doesn't fit in any of these categories.
Masterson, Inc., has 8 million shares of common stock outstanding. The current share price is $68, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, has a coupon rate of 5 percent, and sells for 93 percent of par. The second issue has a face value of $50 million, has a coupon rate of 4 percent, and sells for 105 percent of par. The first issue matures in 23 years, the second in 8 years. Suppose the most recent dividend was $4.20 and the dividend growth rate is 4.3 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 24 percent. What is the company's WACC? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.)
Answer:
WACC=9.26%
Explanation:
Calculation for the company's WACC
First step is to calculate the Total Market Value
Total Market Value = 8,000,000*68+ 65,000,000*93% + 50,000,000*105%
Total Market Value = 544,000,000+60,450,000+52,500,000
Total Market Value = $656,950,000
Second step is to calculate the % Value of Equity,% Value of First Bond and % Value of Second Bond
% Value of Equity =544,000,000/$656,950,000*100
% Value of Equity = 82.81%
% Value of First Bond = 60,450,000/$656,950,000*100
% Value of First Bond= 9.20%
% Value of Second Bond = 52,500,000/$656,950,000*100
% Value of Second Bond =7.99%
Third step is to calculate Ke Using this formula
Ke = Cost of Equity = Dividend/Market Value per share + Growth Rate
Let plug in the formula
Ke = 4.2/68 + 4.3%
Ke= 6.18% + 4.3%
Ke= 10.48%
Last step is to calculate WACC using this formula
WACC = % Value of Equity * Cost of Equity + % Value of Debt * Cost Of Debt (1- Tax Rate)
Let plug in the formula for
WACC= 82.81% * 10.48% + 9.20% * 5% (1-0.24) + 7.99%* 4%(1-0.25)
WACC= 8.67%+ 9.20% * 5%(0.76)+7.99%* 4%(0.76)
WACC= 8.67%+ 9.20% * 3.8%+7.99%* 3.04%
WACC=8.67%+0.35%+0.24%
WACC=9.26%
Therefore the company's WACC will be 9.26%
A firm issues $225 million in straight bonds at an original issue discount of 2.0% and a coupon rate of 6%. The firm pays fees of 4% on the face value of the bonds. The net amount of funds that the debt issue will provide for the firm is
Answer:
$211.5 million
Explanation:
The computation of the net amount of funds that the debt issue is as follows
Particulars Amount
Face value of Bonds $225,000,000.00
Less Discount (225m × 0.02) -$4,500,000.00
Less fees (225m × 0.04) -$9,000,000.00
Net amount of funds $211,500,000.00
Hence, the net amount of funds that the debt issue is $211.5 million
The same is to be considered
How much money would need to be saved monthly if $21,990 was needed to purchase a home in 30 months?
a. $917
b. $611
c. $733
Explanation:
i think A is the correct answer
The money required to save every month to buy a home to collect $21.990 in 30 months would be the option c. $733.
To calculate the monthly saved amount we need to understand that the total amount should be equally divided into 30 months:
total amount = monthly saved money* number of monthsmonthly saved money = [tex]\dfrac{\text{Total amount}}{\text{Number of months}}[/tex]Given:
Total amount: 21,990
Number of months: 30
Solution:
Putting given variables in the second formula we derived above:
monthly saved money = [tex]\frac{21990}{30}[/tex]
monthly saved money = 733
thus, the correct amount to be saved every month would be - $733
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The Holmes Company's currently outstanding bonds have a 8% coupon and a 13% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax cost of debt?
Answer: 8.45%
Explanation:
From the question, we are informed that Holmes Company's currently has an outstanding bonds and has a 8% coupon and a 13% yield to maturity.
We are further told that Holmes believes it could issue new bonds at par that would provide a similar yield to maturity and that its marginal tax rate is 35%.
Holmes's after-tax cost of debt will therefore be calculated as:
= Yield to maturity × (1 - Marginal tax rate)
= 13% × (1 - 35%)
= 13% × (65%)
= 0.13 × 0.65
= 0.0845
= 8.45%
Samuelson Electronics has a required payback period of three years for all of its projects. Currently, the firm is analyzing two independent projects. Project A has an expected payback period of 2.8 years and a net present value of $6,800. Project B has an expected payback period of 3.1 years with a net present value of $28,400. Which projects should be accepted based on the payback decision rule?
A. Project A only.
B. Project B only.
C. Both A and B.
D. Neither A nor B.
E. Either, but not both projects.
Answer:
Explanation:
Project A only
describe how commerce relate with industry and direct services
Inheriting someone else’s _______ is one of the drawbacks of buying an existing business.
You make a business plan _______ you open your business.
Kinkos is an example of a _______.
One of the challenges of a new business is coming up with a workable _______.
Based on your reading, respond to the following.
List two ways to reduce the feeling of loneliness that can occur when you have your own business.
List two of the three “pro” reasons for starting your own business.
Answer:
problems
before
franchise
idea
Any two of these:
Make time to meet with clients instead of talking on the phone.
Join a business networking group.
Take business colleagues or prospects out to lunch at least once a week.
Teach a workshop in your field at the community college.
Any two of these
Freedom
Creativity
Profit
Explanation:
pf
The correct will be Answer:
Problems Before Franchise Idea Any of the two of these: When Make time to meet with the clients instead of talking on the phone. Then Join to a business with networking group. Take any business colleagues or and prospects out to lunch at least once a week. Teach any subject to a workshop in your field at the community college. The three “pro” reasons for starting your own business. Any two of these Freedom Creativity Profitself-employedLearn more about:
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Bob Brain files a single tax return and decides to itemize his deductions. Bob's income for the year consists of $74,100 of salary, $3,450 long-term capital gain, and $2,450 interest income. Bob's expenses for the year consist of $890 in investment advice fees and $155 in tax return preparation fees. What is Bob's investment expense deduction
Answer:
$0
Explanation:
Based on the information give investment expense are NOT deductible reason been that
his income for the year was the amount of $74,100 of his salary , $3,450 of his long-term capital gain, and $2,450 of his interest income in which his expenses for the year was the amount $890 in investment advice fees and the amount of $155 in tax return preparation fees which means that his expenses amount that is been paid in order to help manage tax income just as the information given about Bob Brain will be not be deductible.
A multiplant monopolist can produce her output in either of two plants. She discovers that when marginal revenue is $50, the marginal cost in plant 1 is $70 while the marginal cost in plant 2 is $75. To maximize profits the firm will
Answer: produce more output in plant 1 and less in plant 2.
Explanation:
From the question, we are given the information that a multiplant monopolist can produce her output in either of two plants and that she discovers that when marginal revenue is $50, the marginal cost in plant 1 is $70 while the marginal cost in plant 2 is $75.
Since the marginal cost in plant 2 is higher than that of plant 1, to maximize profits the firm will produce more output in plant 1 and less in plant 2.
a stock has a beta of 1.5 and an expected return of 16.35%. What is the risk free rate if the markert rate of return is 12.5%
Answer:
4.8%
Explanation:
Calculation for the risk free rate if the market rate of return is 12.5%
Using this formula
Expected rate of return = Risk free rate + Beta( Market rate -Risk-free rate)
Let plug in the formula
0.1635 =Risk-free rate of return + 1.5(0.125 -Risk free rate of return)
0.1635 =Risk-free rate of return + 0.1875 - 1.5(Risk-free rate of return)
0.1635 - 0.1875 =Risk-free rate of return - 1.5Risk-free rate of return
−0.024 = - (1-0.5 Risk-free rate of return)
−0.024 = - 0.5 Risk-free rate of return
Risk-free rate of return =0.024 / 0.5
Risk-free rate of return = 0.048
Risk-free rate of return = 0.048 * 100%
Risk-free rate of return = 4.8%
Therefore the risk free rate if the market rate of return is 12.5% is 4.8%
Risks of global trade include all of the following EXCEPT ________.
a. high trade barriers
b. corruption
c. restrictive government policies
d. unstable currencies
e. increased opportunities for growth
Answer:
Option e: Increased opportunities for growth
Explanation:
Global trade is simply the exchange of goods between different countries.Trade is an exchange of items between people or countries.Countries are able to obtain goods they need from other countries.
four major risks in international business includes Country risk, commercial risk, cross-cultural risk, and currency risk.
Increased opportunities for growth is not an effect of risk in global trade.
On January 1, year 1, Olinto created a $650,000 trust that provided his mother with a lifetime income interest starting on January 1, year 1, with the remainder interest to go to his son. Olinto expressly retained the power to revoke both the income interest and the remainder interest at any time. Who is taxed on the trust's year 1 income
Answer:
c. Olinto
Explanation:
Multiple choice "a. Olinto's mother, b. Olinto's son, c. Olinto, d. The trust"
As the income tax rules mandate the liability to pay tax on trustees, the tax can be levied and recovered from a representative assesse i.e., the trustee who is Olinto. Olinto is a grantor and thus as per section 676, he must be taxed on the income generated through revocable trust.
With its current levels of input use, a firm's MRTS is 3 (when capital is on the vertical axis and labor is on the horizontal axis). This implies: Group of answer choices if it used one more unit of both capital and labor, the firm could produce 3 more units of output. the firm could produce 3 more units of output if it increased its use of labor by one unit (holding capital constant). if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output. the firm could produce 3 more units of output if it increased its use of capital by one unit (holding labor constant). the marginal product of labor is 3 times the marginal product of capital.
Answer:
if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output
Explanation:
In the case when the MRTS is 3 so this implies that the value mentioned is one by 3 so this represents the capital amount that are required to subsitute for one unit of labor to remian on the similar isoquant
Therefore as per the given situation, the above represent the answer
Hence, the same is to be considered
Ecyzey541 Corporation manufactures and sells 16,200 units of Product Beautiful each month. The selling price of Product Beautiful is $32 per unit, and variable expenses are $26 per unit. Ecyzey541 is thinking about discontinuing Product Beautiful. Their research shows that $72,000 of the $112,000 in monthly fixed expenses charged to Product Beautiful would not be avoidable even if the product was discontinued. (ID#62560) Q) What would be the monthly financial advantage (disadvantage) for Ecyzey541 if they decide to discontinue Product Beautiful?
Answer:
Effect on income= $57,200 decrease
Explanation:
Giving the following information:
Units sold= 16,200
Unitary contribution margin= (32 - 26)= $6
Avoidable fixed costs= $40,000
To calculate the total financial effect on income each month, we need to use the following formula:
Effect on income= avoidable fixed costs - total contribution margin
Effect on income= 40,000 - (16,200*6)
Effect on income= -$57,200
At a promotion interview, it is important to ________.
a.
Anticipate questions and answer early
b.
Wear uncomfortably formal clothes
c.
Be honest about your qualifications
d.
Discuss your personal life
Answer:
Be honest about your qualifications
Explanation:
Based on workplace standards and practice, at a promotion interview, it is important to "Be honest about your qualifications."
What is a Promotion interview?A promotion interview is conducted for employees working in the same company to determine if they should be elevated to higher positions or ranks.
Aside from performance and number of years of experience in the company, the management also checks the qualifications to determine which employees qualify for a specific higher position.
Therefore, it is expected that during promotion interviews, employees should be honest about their qualifications.
Hence, in this case, it is concluded that the correct answer is option C. "Be honest about your qualifications."
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Becker Industries is considering an all equity capital structure against one with both debt and equity. The all equity capital structure would consist of 36,000 shares of stock. The debt and equity option would consist of 18,000 shares of stock plus $310,000 of debt with an interest rate of 9 percent. What is the break-even level of earnings before interest and taxes between these two options
Answer:
The right approach is "55800".
Explanation:
The given values is:
Rate of interest,
= 9%
= 0.09
The interest cost will be:
= [tex]310,000\times 0.09[/tex]
= [tex]27,900[/tex] ($)
Assumed return on capital employed are X. Break will also be whenever the dual capital requirements participate in almost the same earnings growth.
⇒ [tex]\frac{X}{36000} =\frac{X-27900}{18000}[/tex]
⇒ [tex]X=(X-27900)\times \frac{36000}{18000}[/tex]
⇒ [tex]=(X-27900)\times 2[/tex]
⇒ [tex]=2X-55800[/tex]
⇒ [tex]X=55800[/tex]
Mass customization of products has become a common approach in manufacturing organizations. Explain the ways in which mass customization can be applied to service firms as well.
Explanation:
Mass customization is a strategic approach used in manufacturing organizations to offer the customer a more personalized product that adds greater value to the customer, but with mass production characteristics, which allows lower value in the cost of manufacturing the product, faster production, etc.
Applied to service companies, mass customization can offer the same advantages, that is, add value and reduce costs for the company. Assuming that a company provides image and style consulting services, there may be a mass customization in the strategy of using a method of using the tools of interaction with the client, but that such methods apply to their needs specifically, such as for example a method used by image consultants to discover a client's seasonal color chart.
What is the difference between sole proprietor and partnership?
Answer:
A sole proprietorship is a person who owns the business and is personally responsible for its debts. It is not a legal entity.
A partnership partnership shares the responsibilities, resources, and losses
Explanation:
Koch traded Machine 1 for Machine 2 when the fair market value of both machines was $49,500. Koch originally purchased Machine 1 for $76,000, and Machine 1's adjusted basis was $40,500 at the time of the exchange. Machine 2's seller purchased it for $64,500 and Machine 2's adjusted basis was $55,500 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange
Answer:
$40,500.
Explanation:
Calculation for Koch's adjusted basis in machine 2 after the exchange
Based on the information given we were told that Machine 1's had adjusted basis of the amount of $40,500 at the time of the exchange which means that Koch's adjusted basis in machine 2 after the exchange will the amount of $40,500 which is Machine 1's adjusted basis .
Therefore Koch's adjusted basis in machine 2 after the exchange will be $40,500
On January 1, 2021, Legion Company sold $290,000 of 6% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $217,719, priced to yield 10%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of: (Round your answer to the nearest dollar amount.) Multiple Choice $8,700. $10,886.
Answer:
the bond interest expense for the six months ended June 30, 2021, in the amount of $10,8864
Explanation:
The computation of the interest expense is shown below
= Carrying Value of Bond × Effective interest rate
= $217,719 × 10% yield interest × 6 months ÷ 12 months
= $10,886
Hence, the bond interest expense for the six months ended June 30, 2021, in the amount of $10,8864
Therefore the second option is correct
Marigold Corp. incurred the following costs for 52000 units: Variable costs $312000 Fixed costs 392000 Marigold has received a special order from a foreign company for 2000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $2400 for shipping. If Marigold wants to earn $4000 on the order, what should the unit price be
Answer:
The unit price is $9.2 per unit
Explanation:
The computation of the unit price is shown below
Variable costs for 2,000 units is
= Variable cost ÷ units × special order units
= $312,000 ÷ 52,000 units × 2,000 units
= $12,000
Now the unit price is
= (variable cost + shipping charges + earnings) ÷ special order units
= ($12,000 + $2,400 + $4,000) ÷ (2,000 units)
= $9.2 per unit
Hence, the unit price is $9.2 per unit
The same is to be considered
Omar and Janet decide to revise their budget for Rings and Things. What suggestions about labor
costs would you make, if the goal is to improve the business's cash flow?
Answer:
Review labor costs downwards
Explanation:
Janet and Omar should consider revising their budget for labor downwards. In the current state, labor costs are $1000, which is approximately 57 percent of all costs. As a rule of thumb, labor costs should be between 25 to 35 percent of total costs. This implies that Janet and Omar's labor costs are very high in relation to the other costs.
Janet and Omar should aim for a profit. Ideally, a 25 to 30 percent profit is a good target for such a business. For this to happen, they need to cut down labor to between $300 to a maximum of $400.
A corporation declares $25 million in net income, $1 million in preferred stock dividends, and $7 million in common stock dividends. By how much will shareholders' equity increase on the balance sheet
Answer:
$17 million
Explanation:
A corporation declares $25 million as it's net income
The preferred stock dividend is $1 million
The common stock dividend is $5 million
Therefore the amount in which the shareholders stock equity will increase can be calculated as follows
= net income - preferred stock dividend-common stock dividend
= $25 million - $1 million +$7million
= $25 million -$8million
= $17 million
Submit
A city is considering a plan to ease traffic congestion by offering to eliminate tolls on cars with 3 or more passengers in them. An
economic analysis is done on the plan. Which conclusion, if reached in this analysis, would weigh against adopting the plan?
A)
Reduced toll revenues would threaten public road maintenance budgets.
B)
Peak traffic times would be spread out over a larger portion of the day,
Typical travel speeds on the toll roads would increase 5% during rush
hours
D)
Average numbers of miles commuting would remain level, due to indirect
routes caused by carpooling
Answer:
A)
Reduced toll revenues would threaten public road maintenance budgets.
Explanation:
If cars will more than three people will not pay tall chargers, the city will collect fewer revenues from the toll stations as some cars will not pay. A significant decline in revenues that can affect road maintenance can influence the city to weigh against implementing that proposal.
Spreading the peak time traffic and increasing speeds is what the city hopes to achieve. The city would be happy if the average number of miles commuted remain the same. The only negative effect that could halt the implementation of the plan is reduced revenues.
Answer:A) reduce total revenues would threaten public road maintenance budgets.
Explanation:
a stock is currently priced at $65 per share and will pay a $4 dividend in one year. what must the stock sell for in one year to meet investors expecations of a 15% after tax return if dividends are taxed at 37% and there are no capital gains
Answer:
$72.23
Explanation:
Expected Return = [Dividend *(1- tax rate)] + [Capital gain] / Current stock price
Expected Return = [Dividend *(1- tax rate)] + [Price after 1 year - Current price] / Current stock price
15% = [$4*(1-0.37)]+[Price after 1 year -$65]/65
15% = [$4*0.63]+[Price after 1 year -$65]/65
15% * 65 = $2.52 + [ Price after 1 year -$65]
$9.75 = $2.52 + [Price after 1 year - $65]
Price after 1 year = $9.75 - $2.52 + $65
Price after 1 year = $72.23
Discretionary fixed costs Group of answer choices Have a planning horizon that covers many years May be reduced for short period time with minimal damage to long-run goals of the organization. Cannot be reduced for even short periods of time without making fundamental changes. Are most effectively controlled through the effective utilization of facilities and organization.
Answer:
Cannot be reduced for even short periods of time without making fundamental changes.
Explanation:
discretionary fixed cost in domain of finance can be regarded as expenditure that is incurred for a fixed asset as well as specific cost period , this cost can be reduced because if reduced it will not have impact immediately on the profit of the company. It should be noted Discretionary fixed costs Cannot be reduced for even short periods of time without making fundamental changes.
A company's January 1, 2019 balance sheet reported total assets of $153,000 and total liabilities of $61,500. During January 2019, the company completed the following transactions:______. (A) paid a note payable using $11,500 cash (no interest was paid); (B) collected a $10,500 accounts receivable; (C) paid a $5,300 accounts payable; and (D) purchased a truck for $5,300 cash and by signing a $21,500 note payable from a bank. The company's January 31, 2019 balance sheet would report which of the following?Assets Liabilities Stockholders's Equity$163,000 $77,700 $85,300Assets Liabilities Stockholders's Equity$153,000 $61,500 $91,500Assets Liabilities Stockholders's Equity$174,500 $105,100 $69,400Assets Liabilities Stockholders's Equity$157,700 $66,200 $91,500
Answer:
d. Assets, Liabilities, Stockholders's Equity [$157,700, $66,200, $91,500]
Explanation:
Accounting equation
Assets = Liabilities + Equity
Beginning Balance $153,000 $61,500 $91,500
1. -$11,500 -$11,500
2. $10,500
-$10,500
3. -$5,300 -$5,300
4. $26,800 $21,500
-$5,300
Total $157,700 $66,200 $91,500
D- Company's standings as on 31st January 2019 will be assets amounting to $157700, the liabilities will amount to $66200 and stockholder's equity in the company stands at $91500.
It is to be noted that the assets of the firm are always equal to the summation of total liabilities of the firm along with stockholder's equity being held in the company for such period.
We know the formula that Liabilities of a firm are calculated by the way of subtracting the stockholder's equity of the company from the total assets being held by the company.Various adjustments occurred during the period of making such accounting entries and hence this resulted in obtaining the true and fair values of positioning of the company.After due adjustments the values are calculated as shown given in the image below.Hence, the assets are calculated as $157700, the liabilities of the company stand at $66200 and the stockholder's equities stand at $91500.
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In each case, choose the firm that you expect to have the higher asset turnover ratio. (Hint: think about the likely nature of each firm’s business model. For example, would the firm require a lot or a little capital? Would it strive for high sales or high profit margins?) (LO4-3) a. Economics Consulting Group or Home Depot b. Catalog Shopping Network or Gucci c. Electric Utility Co. or Standard Supermarkets
Answer:
Asset Turnover ratio = Net Sales/ Average Total Assets
a. Economics Consulting Group or Home Depot.
Home Depot has more physical assets than the Economic Consulting group which has its main assets as its employees which cannot be recorded as values in the balance sheet. ECG will therefore have more sales to assets and a higher Asset Turnover ratio.
b. Catalog Shopping Network or Gucci.
Catalog Shopping conducts its business mainly online or rather without using stores which means they will not hold as much physical inventory. This is different from Gucci which will hold inventory as well as have stores and the like. They will have more assets than Catalog Shopping Network which will give Catalog a higher Asset Turnover.
c. Electric Utility Co. or Standard Supermarkets.
Electric Utility Co. as an electric provider will have a high amount of assets as the nature of their business demands this. Supermarkets in comparison have less assets and so this will give them a higher Asset Turnover ratio.
Your grandfather wants to determine the value of his bond portfolio and asks you for help. Find the current market values of the components of your grandfather’s portfolio. (a) 80 bonds with a $1,000 face value and a coupon rate of 7.6%/year. These bonds have 11 years left to maturity and pay coupons on a semi‐annual basis. The YTM of these bonds is 8.8%/year. What is the total market value of these 80 bonds? (3 pts.) (b) 160 zero‐coupon bonds with a $1,000 face value, 9 years to maturity, and a YTM of 7.7%/year
Answer:
a) $73,320.80
b) $82,068.80
Explanation:
Current market value of bonds:
PV of face value = $1,000 / (1 + 4.4%)²² = $387.78
PV of coupon payments = $38 x 13.91402(PV annuity factor, 4.4%, 22 periods) = $528.73
Market price = $916.51
$916.51 x 80 = $73,320.80
Current market value of zero coupon bonds:
PV of face value = $1,000 / (1 + 7.7%)⁹ = $512.93
$512.93 x 160 = $82,068.80