Answer: a. $5.50
b. $6.1
c. $3,500,000
Explanation:
a. From the question, we are informed that Hawar International is a shipping firm with a current share price of $5.50 and 10 million shares outstanding and that Hawar announces plans to lower its corporate taxes by borrowing $20 million and repurchasing shares.
We are informed that Hawar announces plans to lower its corporate taxes by borrowing $20 million and repurchasing shares. This is a transaction and therefore, the value if the share won't be changed. So, the value for the share will still be $5.50.
b. If the only imperfection is corporate tax rate of 30%, the share price after this announcement will be:
= [30% × (20million/10million)] + $5.50
= [0.3 × 2] + $5.50
= $0.6 + $5.50
= $6.1
Therefore, the share price be after this announcement will be $6.1.
c. If the share price rises to $5.75 after this announcement, the PV of financial distress costs Hawar will incur as the result of this new debt will be:
= ($6.1 - $5.75) × 10,000,000
= $0.35 × 10,000,000
= $3,500,000
Answer:
Options B and C are correct.
- Marginal profit is negative.
- Profit is positive.
Explanation:
At q = 150
R = 80q = 80(150) = 12,000
C = 0.002(150)3 + 22(150) + 750 = 6750 + 3300 + 750 = 10,800
R > C so first is incorrect.
MR = 80
MC = 0.006(150 x 150) + 22 = 135 + 22 = 157
MC > MR so B is correct.
Profit = TR - TC = 80(150) - 0.002(150)3 - 22(150) - 750 = 12000 - 10800 = 1200
Profit is positive.
Marginal profit = MR - MC = 80 - 157 = - 77
MR is Negative
Answer:
Total cost= $6,180
Explanation:
<u>First, we need to calculate the predetermined overhead rate:</u>
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (202,100/47,000) + 2
Predetermined manufacturing overhead rate= $6.3 per direct labor hour
<u>Now, we can allocate overhead:</u>
<u />
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 6.3*100
Allocated MOH= 630
<u>Finally, the total cost:</u>
Total cost= 850 + 4,700 + 630
Total cost= $6,180
Answer:
A) $0
Explanation:
as per IRC section 101g, if the payment exceeds the greater of per actual cost then the excess payment amount will be taxable.
total tax free payment = 360*30
= $10,800
Therefore, The taxable amount is $0
Answer:
See explaination
Explanation:
cost of debt, after-tax = (4.3% + 1.2%)*(1 - 26%) = 4.07%
cost of equity = 4.3% + 1.3*4% = 9.5%
market capitalization = 286130000 * 182 = 52075660000
total value of equity outstanding = market capitalization = 52075660000
Debt portion = 11532000000 / (11532000000 + 52075660000) = 0.18
Equity portion = 1 - 0.18 = 0.82
weighted average cost of capital = 0.18*4.07% + 0.82*9.5% = 8.52%
