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notsponge [240]
2 years ago
9

As a consultant to First Responder Inc., you have obtained the following data (dollars in millions). The company plans to pay ou

t all of its earnings as dividends, hence g = 0. Also, no net new investment in operating capital is needed because growth is zero. The CFO believes that a move from zero debt to 20.0% debt would cause the cost of equity to increase from 10.0% to 12.0%, and the interest rate on the new debt would be 8.0%. What would the firm's total market value be if it makes this change? Hints: Find the FCF, which is equal to NOPAT = EBIT(1 %u2013 T) because no new operating capital is needed, and then divide by
(WACC %u2013 g).

Oper. income (EBIT) $800 Tax rate 40.0%
New cost of equity (rs) 12.00% New debt ratio 20.0%
Interest rate (rd) 8.00%
Business
1 answer:
sineoko [7]2 years ago
8 0

Answer:

the firm's total market value be if it makes this change is up to 4545.45

Explanation:

  • Step 1. Find the WACC according to the following calculation.

  • Step 2. Set up the variables. WACC = 0.8*12 + 0.2*8*(1-0.4) = 9.6 + 0.96 = 10.56 % ;

  • Step 3. Solve.  FCF = EBIT/WACC = 800*(1-0.4)/0.1056 = $ 4545.45

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Cathy’s apartment was broken into and her two-year-old sound system was taken. Cathy had paid $1,400 for the system, but it will
dedylja [7]

Answer:

$1,240

Explanation:

The actual cash value coverage will pay for the replacement cost of Cathy's sound system minus depreciation.

replacement cost = $1,800

expected useful life = 10 years

depreciation for 2 years = $1,800 x 2/10 = $360

sound system's net value = $1,800 - $360 = $1,440

Cathy will receive = net value of sound system - deductible = $1,440 - $200 = $1,240

5 0
2 years ago
Thornton Camps, Inc. leases the land on which it builds camp sites. Thornton is considering opening a new site on land that requ
Alona [7]

Answer:

$20.

Explanation:

So, we have the following important data or parameters the are going to help us or assist us in solving this particular Question or problem.

(1). Total number of customers served campers = 6600.

(2). Rental payment per month = $3,300.

(3). Total number of months = 12 months( that is January to December).

(4). "The variable cost of providing service is expected to be $5 per camper"

So, let us delve right into the solution of the question.

Step one: determine the fixed cost per unit. The fixed cost per unit can be determined by following the formula below;

Fixed cost per unit = (rental payment pee month × number of months) ÷ total number of campers.

Thus, the fixed cost per unit = $3,300 × 12) ÷ 6,600.

The fixed cost per unit = 6.

STEP TWO: The next thing to do now is to determine the price it should charge for a camp site in February and August.

Kindly note that this the price that it should charge for a camp site in February and August are going to be the same.

Therefore, the price it should charge for a camp site in February and August = $6 + $5 + $9 = $20.

4 0
2 years ago
Juanita is training for a triathlon, a timed race that combines swimming, biking, and running.
VikaD [51]

Answer:

Juanita's trainning dilema:

B:People face trade-offs

Icestorm:

A:Markets allocate goods effectively.

Explanation:

Any hour on swimming trainning is one less for bike or running.

Also an hour runnings is one less for swimming or running

an bike hours negate the change for swimming or running.

This is the concept of opportunity cost. chose something is also chose not to do anything else.

When there is need of a certain good, batteries in this case, the market (which is the sum of all people willing to do business) will allocate resource when needed. As the demand for batteries and flashlights increased, the stores chose to purchase these instead of other to replenish the stock and make a stand to the increased demand.

8 0
2 years ago
Recording depreciation each period is necessary in accordance with thea. going concern principle.b. historical cost principle.c.
Setler [38]

Answer:

c. expense recognition principle

When a firm buys an asset that has a useful life of more than a year, it means that the cost of the asset should also be spread through out its life, the reason for this is that the asset is that this asset will create revenue for more than one year so its cost should also be split up. The expense recognition principle states that expenses should be recognized in the same period as the revenues to which they relate, and following this rule is the reason that depreciation is recorded in each period. If depreciation was not recorded and the asset was expensed the year it was bought, it would reduce the profits in the first year and increase them in the following years

Explanation:

3 0
2 years ago
Gina is working as a marketing trainee for a streaming video company. Her boss called a meeting for next week with one thing on
sveta [45]

Answer:

C) Create a customer-driven environment where we constantly try to create customer value.

Explanation:

A competitive advantage basically refers to offering a better service at the same price as your competition, or offering the same service as your competition but at a lower price. In this case, Gina's idea focuses on offering a differentiated and better service than the competition, and hopefully be able to sell it at the same price.

In order to create a customer driven environment, the company must identify its customers's needs and it must do everything it can to satisfy those needs. This will increase both the perceived quality of the service and consumer satisfaction.

8 0
2 years ago
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