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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 (with a 10 percent rate of interest) 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.
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.Why are the percentage changes different?
What are the advantages and disadvantages to a U.S. corporation which employs currency options on euros rather than a forward contract on euros to hedge its exposure in euros?
Are the actions of Morrison Company and the SPE legal? explain. Should Morrison Company report the debt on the balance sheet?
Find out the compound amount if $6,400 is invested for 2 years at 12% compounded monthly. What difference would compounding daily make in this example?
Deborah Tan is a listed nurse who earns $3250 per month after taxes. She has been viewing her savings strategies & current banking arrangements to estimate if she should make any changes.
Fama's Llamas has a weighted average cost of capitalof 9.8 percent. The company's cost of equity is 13 percent, and its cost of debt is 6.5 percent. The tax rate is 35 percent. What is Fama's debt-equity ratio?
Suppose you are 20 years from retirement, and expect to live another 20 years after retirement. If you start saving now, how much will you be able to withdraw each year for every dollar per year that you save, suppose an effective annual interest rat..
There is no change expected in the other working capital components. The discount rate is 8% and What is the NPV of the project?
Select an apparel company planning another facility: Discuss interest rates to begin today or in six months using TVM. How is the time value of money important to the company?
This preferred stock is currently selling for $56.46 per share. What is the yield or return (r) on this preferred stock?
What steps do Vikki and Tim need to take to prepare for retirement?
Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?
You just acquired a mortgage in the amount of $249,500 at 5.8 percent interest, compounded monthly. Equal payments are to be made at the end of each month for thirty years. How much of the first loan payment is interest? (Assume each month is equa..
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