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Sedaia [141]
1 year ago
15

Suppose Luther Industries is considering divesting one of its product lines. The product line is expected to generate free cash

flows of $2 million per year, growing at a rate of 3% per year. Luther has an equity cost of capital of 10%, a debt cost of capital of 7%, a marginal tax rate of 35%, and a debt-equity ratio of 2. This product line is of average risk and Luther plans to maintain a constant debt-equity ratio. The unlevered value of Luther's Product Line is closest to:
Business
1 answer:
erik [133]1 year ago
6 0

Answer:

$61,127,596

Explanation:

formula for the value of operations =

[Free Cash Flows (1 + growth rate)] / (WACC - growth rate)

where

We have D/E = 2 or D=2*E  (debt-equity ratio)

Tax = T=35%,

Ks=10%,

Kd =7%

Kd*(1-T) = 7%*(1-35%) = 4.55%

WACC = Kd*(1-T)*(D/(D+E)) + Ks*(E/(D+E))

WACC = 4.55%*(2E/3E) + 10%*(E/3E)

WACC = 4.55%*(2/3) + 10%*(1/3)

WACC = 6.37%

Value of Ops = 2000000*(1+3%)/(6.37%-3%)

Value of Ops = $61,127,596

to be profitable it must receive for the product line $61,127,596

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Agnes pays state income tax equal to 3.75% of her federal taxable income. She pays federal income tax equal to 28.4% of her fede
max2010maxim [7]

____________________________________________________

Answer:

Your answer would be D). $2,040.00

____________________________________________________

Explanation:

To find the state income tax in this situation, we would need to be doing a lot of multiplying and dividing in order to get our answer.

We would use this equation:

t = px

t = Total paid

p = percentage

x = unknown

In this case, we would need to find what x is.

Let's give you the equation:

15,449.60 = 28.4x

We would need to get x by itself, so we would divide by 28.4. But first, we would need to move the decimal place from 28.4 2 times to the left, so we would be dividing by .284

\frac{15449.60}{.284} = 54,400

Now, that;;s the federal income tax, but we have to find the state income tax. We would use 54,400 and miltiply it by 3.75 (move 2 decimal places to the left to get 0.0375).

54,400*0.0375= 2,040

Agnes payed <u>$2,040</u> in state income tax.

D). $2,040 should be your FINAL answer.

____________________________________________________

8 0
1 year ago
For the next 2 questions, use the financials of Acme Corporation. After adjusting revenue for accounts receivable and deferred r
Mekhanik [1.2K]

Answer: B. $892.1 million

Explanation:

The Revenue was $939,393 million

When calculating how much cash was generated any increase to the Accounts Receivables is removed from the revenue because it signifies that more sales were made on credit and so have not given the business cash yet.

Any increase in Deferred Revenue must be added because this is Cash that has been given to the business but for accrual purposes cannot be recognized yet. Bottomline however, the Cash has been received.

Increase in Receivables = 309,196 - 221,504

= $87,692 million

Increase in Deferred Revenue= 374,730 - 334,358

= $40,372 million

The Cash generated is therefore;

= 939,393 - 87,692 + 40,372

= $892,073

= $892.1 million

I have attached the Financial Statements of Acme Corporation.

6 0
2 years ago
Big data analytics programs (which analyze massive data sets to make decisions) use gigantic computing power to quantify trends
Sidana [21]

Answer:

The correct answer is: No, it may not decrease the humanity of production in organizations.

Explanation:

To begin with, the term known as <em>''humanity of production'' </em>refers to that human element that gives to the company its capability of leadership and other human abilities. Moreover, when it comes to the big data analytics those programs would not decrease the humanity of production because in order to create all those programs and in order to read all the information that those programs give and to use it and implement there will be a need of using human capital to complete the whole objective. So therefore that human will be as need as machines.

8 0
1 year ago
Melon Lawn Co. advertises its new XJ200 lawn mower. Salespersons describing the XJ200 on behalf of Melon Lawn describe it as a "
kramer

Answer:

<em>c. puffery</em>

Explanation:

Puffery happens when <em>advertisers are trying to encourage people across different techniques to purchase  a product or service.</em>

A business can send an amusing advertisement about its product,  contrast the product to a similar item, mention product details,  or make broad statements about the product that can not be proven to be true.

7 0
1 year ago
Mulligan Manufacturing Company uses a job order cost system with overhead applied to products at a rate of 150 percent of direct
7nadin3 [17]

Answer:

a) 25000 labor x 150% rate =37,500 overhead

b) total manufacturing cost:

12,000 +25,000 + 37,500 =  74,500

d) labor  = overhead / 1.5 = 18000 / 1.5 = 12,000

c) total less labor les maufacturing = materials

45,000 - 18,000 - 12,000 = 15,000

e) to solve for labor we express overhead in function of labor:

materials + labor + 1.5labor = total manufacturing

15,000 + 2.5 labor = 35,000

labor = (35,000 - 15,000) / 2.5 = 8000

f) overhead: 8,000 x 1.5 = 12,000

Table to fill:

Direct Material used

12,000    //   c    //   15,000

Direct labor

25,000  //   d   // e

Manufacturing overhead applied

a   //  18,000 //  f

Total current manufacturing costs  

b   //  45,000   //  35,000

Explanation:

4 0
1 year ago
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