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anyanavicka [17]
2 years ago
5

Bassett Fruit Farm expects its EBIT to be $373,000 a year forever. Currently, the firm has no debt. The cost of equity is 13.2 p

ercent and the tax rate is 35 percent. The company is in the process of issuing $2.8 million worth of bonds at par that carry an annual coupon of 6.6 percent. What is the unlevered value of the firm
Business
1 answer:
julia-pushkina [17]2 years ago
6 0

Answer:

The correct answer is $1,836,742.42.

Explanation:

According to the scenario, the given data are as follows:

EBIT = $373,000

Cost of equity = 13.2%

Tax rate = 35%

So, we can calculate the unlevered value of the firm by using following formula:

Unlevered value of the firm = EBIT × (1 - TAX RATE) ÷ COST OF EQUITY

By putting the value, we get

Unlevered value of the firm = $373,000 × ( 1 - 35%) ÷ 13.2%

= $373,000 × 0.65 ÷ 0.132

= $242,450 ÷ 0.132

= $1,836,742.42

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Which of the following is a true statement? Question 9 options: when making decisions about saving and borrowing, people care ab
slamgirl [31]

Answer:

A falling interest rate will lead to a movement along the demand curve for loanable funds

Explanation:

A movement along the demand curve for a good or service is caused by a change in the price of the good or service.

Because the interest rate is the price of the loanable funds, a falling interest rate will cause a movement along the demand curve for loanable funds. More specifically, a falling interest rate, in other words, a lower price, will increase the demand for the loanable funds, so the movement will be upwards.

6 0
2 years ago
Ryker Manufacturing, inc. provided the following information for the year: The inventory account balances as of January 1 are gi
Licemer1 [7]

Answer:

B. $304,060

Explanation:

We know that

Ending balance of finished goods inventory  = Beginning balance of  finished goods inventory + Cost of Goods manufactured - Cost of Goods Sold

=  $304,560 + $290,500 - $291,000

= $304,060

We simply applied the above formula to compute the ending balance of finished goods inventory by considering the beginning balance of finished goods inventory, cost of goods manufacture and cost of goods sold.

8 0
1 year ago
1. Potash Corporation acquired the voting stock of Safestyle Company on January 1, 2019 for $50 million. Safestyle's book value
Nataly_w [17]

Answer:

The correct answer for you question is $53, 300, 000

Explanation:

I have attached the complete question for you refrence.

Answer : $53,300,000

Explanation:

Equity investment in Safestyle: Amount $'m

Year 2019:

Cash 50

add: Net Income 2019. 3

less: Impairment of Goodwill 2019 -1

Closing Balance 2019. 52

Year 2020:

Opening Balance 2020 52

add: Net Income 2020 1.8

less: Impairment of Goodwill 2020 -0.5

Closing Balance 2020 53.3

4 0
2 years ago
The account receivable turnover measures: Multiple Choice All of the options are correct. How often, on average, receivables are
denpristay [2]

Answer:

How often, on average, receivables are received and collected during the period

Explanation:

An account receivable is an accounting entry that measures the amount which a firm or organization will receive soon that is not paid yet by the customers. Likewise, account receivable turnover measures the average amount received and collected in a particular period. It helps to understand the average receivable amount and what must be changed to improve it.

6 0
2 years ago
A nine-year project is expected to generate annual revenues of $137,800, variable costs of $82,600, and fixed costs of $11,000.
AleksAgata [21]

Answer:

Option (a) is correct.

Explanation:

Given that,

Annual revenues = $137,800,

variable costs = $82,600

Fixed costs = $11,000

Annual depreciation = $23,500

Tax rate = 34 percent

Annual Income before Taxes:

= Annual revenues - Variable cost - Fixed Costs - Depreciation

= $137,800 - $82,600 - $11,000 - $23,500

= $20,700

Net income:

= Annual Income before Taxes × ( 1 - T)

= $20,700 × 0.66

= $13,662

Annual operating cash flow:

= Net income + Depreciation

= $13,662 + $ 23,500

= $37,162

3 0
2 years ago
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