Firm a has 10000 in assets entirely financed with equity

Assignment Help Finance Basics
Reference no: EM13396812

1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000.

a. What is the operating income (EBIT) for both firms?

b. What are the earnings after interest?

c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b.

d. Why are the percentage changes different?

Reference no: EM13396812

Questions Cloud

Starch cellulose dextran and glycogen are polysaccharides : starch cellulose dextran and glycogen are polysaccharides. how are they similar? to what are their different properties
Learning ndash enterprises have but may not always take the : at a generic level innovation is a core business process concerned with renewing what the organization offers the world
Explain why two curves are upward or downward sloping write : in your own words explain as and ad curve and the resulting equilibrium. specifically describe why the two curves are
Discoveries in dna evolution biotechnology and cell biology : the minimum length for this assignment is 2000 words. be sure to check your report for your post and to make
Firm a has 10000 in assets entirely financed with equity : 1. firm a has 10000 in assets entirely financed with equity. firm b also has 10000 in assets but these assets are
The terms innovation and commercialization are commonly : the terms innovation and commercialization are commonly used in a number of overlapping ways to refer to the process of
What do you mean by the term agency relationship who are : 1. if malpractice is a problem in this country what should health care providers do to keep it from happening? what
How does the concept of the time value of money affect : how does the concept of the time value of money affect decisions made across the four executive roles of management
The business excellence model bem is a widely used : 1.the business excellence model bem is a widely used framework that helps companies to review their performance and

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Which set of projects should be accepted

Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of projects should be accepted? Explain.

  What is the fair price of each bond

Based on the fair prices at the various yields to maturity, is interest-rate risk the same, higher, or lower for longer versus shorter maturity bonds? Please show me how to alculate the answers.

  Which of the following is not likely to have induced u.s.

According to the text, which of the following is not likely to have induced U.S. firms to expand globally?

  Which financial statement requires input from the income

The financial statements present a company to the public in financial terms. (1) Which financial statement requires input from the Income Statement and Statement of Retained Earnings and (2) explain what information this financial statement provid..

  What is the pretax cost of debt

jiminy's Cricket Farm issued a 30-year, 7.6 percent semiannual bond 6 years ago. The bond currently sells for 92.5 percent of its face value. The company's tax rate is 38 percent. What is the pretax cost of debt?

  What is the opportunity cost of debt for these bonds

What is the opportunity cost of debt for these bonds and what price should these bonds sell for in the market

  Accounting for merger-acquisition using fair value method

A company which gets or merges with another company is now needed to account for that merger/acquisition using Fair Value Method.

  Optimal cost of capital-wacc

What is meant by Weighted Average Cost of Capital (WACC)? Why is WACC a more appropriate discount rate when doing capital budgeting?

  How many hours will it take to complete grading operation

A motor grader requires two passes at 2 miles per hour, two passes at 3 miles per hour, and one pass at 4 miles per hour to accomplish the work; job efficiency is 0.80. How many hours will it take to complete the grading operation for the 2-mile p..

  What is the dividend yield

You expect a share of stock to pay dividends of $1.10, $1.35, and $1.60 in each of the next 3 years. You believe the stock will sell for $21 at the end of the third year.

  What is the payback period of the project

Suppose Conch Republic loses sales on other models because of the introduction of the new model. How would this affect your analysis?

  Calculate the expected net present value of the project

Identify 3 qualitative factors in addition to the value of the real option that the company should consider in making its decision.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd