Business, 07.07.2020 20:01, patricialovett4570

Now that your firm has matured, you are considering adding debt to your capital structure for the first time. Your all-equity firm has a market value of $21 million and you are considering issuing $2 million in debt with an interest rate of 5% and using it to repurchase shares. You pay a corporate tax rate of 40%. Assume taxes are the only imperfection and the debt is expected to be permanent. A. What will be the total value of the firm after the change in capital structure? B. What will be the value of the remaining equity after the change in capital structure?

Answers: 3

Show answers

Answers

answered: laurenrubin18

A. The total value of the firm after the change in capital structure is $21,800,000

B. The value of the remaining equity after the change in capital structure is $19,800,000

Explanation:

A. In order to calculate the total value of the firm after the change in capital structure we would have to make the following calculation:

total value of the firm after the change in capital structure=Value of unlevered firm+Debt*tax rate

According to the given data we have the following:

Value of unlevered firm=$21 million

Debt=$2 million

tax rate=40%

Therefore, total value of the firm after the change in capital structure=$21 million+$2 million*40%

total value of the firm after the change in capital structure=$21,800,000

B. To calculate the value of the remaining equity after the change in capital structure we would have to make the following calculation:

value of the remaining equity after the change in capital structure=total value of the firm after the change in capital structure-debt

value of the remaining equity after the change in capital structure=$21,800,000-$2,000,000

value of the remaining equity after the change in capital structure=$19,800,000

answered: Guest

Your answer is c the bank manager might not improve a loan people take big risks when they ask there bank for a loan.

answered: Guest

apex verified answer < 3

: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : doubling a recipe and figuring out how many cups of paint to use are both examples of using math skills : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

i really hope this this is the correct answer < 3 < 3 < 3

Other questions on the subject: Business

Business, 22.06.2019 21:10, chimwim7515

The chromosome manufacturing company produces two products, x and y. the company president, jean mutation, is concerned about the fierce competition in the market for product x. she notes that competitors are selling x for a price well below chromosome's price of $13.50. at the same time, she notes that competitors are pricing product y almost twice as high as chromosome's price of $12.50.ms. mutation has obtained the following data for a recent time period: product x product y number of units 11,000 3,000 direct materials cost per unit $3.23 $3.09 direct labor cost per unit $2.22 $2.10 direct labor hours 10,000 3,500 machine hours 2,100 1,800 inspection hours 80 100 purchase orders 10 30ms. mutation has learned that overhead costs are assigned to products on the basis of direct labor hours. the overhead costs for this time period consisted of the following items: overhead cost item amount inspection costs $16,200 purchasing costs 8,000 machine costs 49,000 total $73,200using direct labor hours to allocate overhead costs determine the gross margin per unit for product x. choose the best answer from the list below. a. $1.93b. $3.12c. $7.38d. $2.43e. $1.73using activity-based costing for overhead allocation, determine the gross margin per unit for product y. choose best answer from list below. a. $10.07b. ($2.27)c. ($5.23)d. ($7.02)e. $7.02

Answers: 3

continue

Business, 22.06.2019 22:50, brookephillips1099

Total marketing effort is a term used to describe the critical decision factors that affect demand: price, advertising, distribution, and product quality. define the variable x to represent total marketing effort. a typical model that is used to predict demand as a function of total marketing effort is based on the power function: d = axb suppose that a is a positive number. different model forms result from varying the constant b. sketch the graphs of this model for b = 0, b = 1, 0< b< 1, b< 0, and b> 1. (we encourage you to use excel to do this.) what does each model tell you about the relationship between demand and marketing effort? what assumptions are implied? are they reasonable? how would you go about selecting the appropriate model?

Answers: 1

continue

Business, 23.06.2019 00:00, Mypasswordishotdog11

Match each economic concept with the scenarios that illustrates it

Answers: 2

continue

Business, 23.06.2019 00:40, briarkaltvedt

You are a team of marketing consultants. it is 2008 and the great recession has struck. one of your clients is whole foods market (sometimes known as whole paycheck). wfm has come to you and asked for strategic advice on how to adapt their product and pricing strategies in light of the economic downturn: 1. advise wfm on the various approaches that could be taken to reducing price. be sure to consider potential psychological impact of price reductions on wfm consumers. 2. based on the options outlined in part 1, recommend an approach and support with marketing theory.

Answers: 2

continue

Do you know the correct answer?

Now that your firm has matured, you are considering adding debt to your capital structure for the fi...