bruin manufacturing has expected ebit of $26,000 in perpetuity. a tax rat 35% and debt equity ratio of 60 percent. the firm has $60,000 in outstanding debt at an interest rate of 8percent and its wacc is 12 percent. what is the value of the firm according to m&m proposition 1 with taxes?. should bruin change its debt-equity ratio if the goal is to maximize the value of the firm? explain.

Answers

Answer 1

The value of the firm according to M&M proposition 1 with taxes will be as follows,

WACC = .12 = (100/160)RE+ (60/160)(.08)(.65) ;RE= .1608

RE= .1608 = RU+ (RU– .08)(.6)(.65) ;RU= .1381

VU= EBIT(1 – t)/RU= ($26,000)(.65)/.1381 = $122,348.96

VL= VU+ Dt = $122,348.96 + .35D = $140,833.33

Or

VL= EBIT(1 – t)/WACC = ($26,000)(.65)/.12

= $140,833.33

What is M&M proposition?

Miller and Modigliani theory mentions two propositions. Proposition I state that the market value of any firm is independent of the amount of debt or equity in capital structure. Proposition II states that the cost of equity is directly related and incremental to the percentage of debt in the capital structure.

B) Applying M&M Proposition with tax the capitals, the firm has increased its value by issuing debt. As long as M&M Proposition holds, that is, there are no bankruptcy costs and so then the company should continue to increase its debt equity ratio to maximize the value of the firm.

Thus, the value of the firm according to M&M proposition 1 with taxes will be $140,833.33.

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Related Questions

interview a business owner manager on a crisis experienced in a workplace. Attach an interview schedule as part of your oral presentation​

Answers

It is essential to prepare a script with well-structured and organized questions to conduct an effective interview on any topic.

What to ask in an interview for a survey?

The questions must be objective to avoid ambiguity and obtain the answers that will solve your thesis. To interview a company manager about a crisis in the workplace, some questions might be:

How did the crisis arise?What was the risk management plan?How did the company get over it?

Therefore, it is essential that the research is planned and conducted in an organized and structured manner for effective results.

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Bolve, a company that essentially made leather bags and jackets, introduces men's cologne under its new category of skincare products. In this case, Bolve is engaged in _____.

a.
line extension

b.
market segmentation

c.
brand extension

d.
product bundling

Answers

A company engaged in producing leather bags and jackets introducing men's cologne is under the activity of brand extension.

What is brand extension?

When a brand expands the scope of the types and categories of products, goods and/or services it sells, it is known as brand extension.

Hence, option C correctly describes that Bolve is engaged in brand extension.

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Which of these characteristics is consistent with a Straight Life policy?

Answers

i think it’s d good luck

Business Study assignment grade 10

Answers

Where the picture at so I can answer it
Where is the question

Public relations are external communications aimed outside the business or organization.
Group of answer choices

True

False

Answers

False. External public relations are external communications aimed towards outside organizations; however, public relations are inside communications, and the opposite of external relations.
honestly if im really like really being honest with you in my total honest opinion in all honesty i fr honestly have no clue

Which of the following usually provide the investor with the most interest? Checking Account Savings Account Money Market Savings Account Certificate of Deposit

Answers

Answer:

Certificate of deposit, or CD: usually has the highest interest rate among savings accounts but the most limited access to funds.

The drawings account receives a __________ entry when the owner withdraws money for personal use.

A. Debit
B. Credit

Answers

B. Credit

Hope this helps :)
The drawings account receives a DEBIT entry when the owner withdraws money for personal use.

Option A

Hope this helps you :))

Is the balance of payments deficit always bad and surplus always good?

Answers

Answer:

The truth is, current account deficits are not always bad, and nor are current account surpluses always good. The difference between a country's national income (Y) and private plus government consumption (C+G) is national savings (S) (i.e., private and government savings).

Tax incidence is concerned with tax loopholes.
Please select the best answer from the choices provided
Т
F

Answers

Answer:

F

Explanation:

Tax incidence is concerned with tax loopholes. FALSE.

The belief that taxes should be paid based on benefits received, despite total income, is known as the benefit principle of taxation.

Which of the following choices is one of the leading economic indicators?
advance monthly retail sales
structural unemployment
annual unemployment data
gross national product

Answers

Answer:

Gross National Output

Explanation:

This is a leading economic indicator because it tell us the well-being and health of the overall economy. A low gross national output also means that unemployment rate may be high because resources are not fully utilized--be it structural unemployment or total unemployment. Monthly retail sales also feeds into Gross National Output.

Describe the mechanism of impact of monetary policy on aggregate demand of the economy through interest rates?

Answers

Answer:

Higher monetary policy rate increases interest rate in the banking system which increases the cost of borrowing and reduces aggregate demand.

Explanation:

An increase in the monetary policy rate (mpr) will lead to an increase in the interest rates in the banking system. This increases the cost of borrowing which reduces aggregate demand. However, if the central bank reduces mpr, interest rates in the banking system reduces which leads to the fall in the cost of borrowing which increases aggregate demand.

_____ help a business keep track of its target market.

A. Target markets

B. Market shares

C. Market research

D. Customer profiles

Answers

Answer:

I would say A.

Explanation:

By defining your target customers you can: better determine if there are enough potential customers for your business.

( I hope this helps ^^)

Answer:

d. customer profiles

Explanation:

just took the quiz on edge

Visit any retail store in your community and request a 20 minutes appointment to interview the owner or manager so that you can collect relevant information State the name of the business and the year in which it was established
1.1 List and explain any THREE objectives this business is able to meet?
1.2 Use an appropriate example from this retail store and differentiate between total revenue average revenue and marginal revenue.​

Answers

The three objectives in the retail store are:

Excellent Customer Service.Boast Brand Awareness.Create or form Brand Loyalty.

What is average revenue?

Average revenue is known to be the one that depicts how much revenue exist  per unit of the output.

Marginal revenue is one that connote the increase or boast up that is found in total revenue as it is said to be increasing from one output unit.

Note therefore, that if the three objectives in the retail store are meant, the store will have a lot of customers.

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Rita Rodriquez obtained a 24 month

Answers

Answer:

True

Explanation:

snce rita times 4 to the power of rodriquez is 24 then this is proven to be true

Buying insurance and saving for the future is a hard choice for many people?

Answers

Answer:

Many people like to look at short-term rather than long-term when it comes to financing. Additionally, I would say the lack of financial literacy plays into why people don't choose to invest for the future. It really depends on the socioeconomic status a person is in because some may struggle to make ends meet and can't afford to invest for the future. I would definitely lean towards lack of financial literacy because you'd be surprised how people know more about irrelevant matters than crucial information necessary for decision making.

It would be less hard for me because of the resources around me that help me understand my options and how to manage my money. For people like my parents who lack these resources and knowledge, they are less inclined to invest because they don't know how investments work.

Explanation:

wrd

Answer:

Yeah that's your question given is truly real life in our daily life because if we don't buying or saving for the future it's important thing that we must learn.

I’d like to be a web developer,” says Cyrus. “But I don’t know if I want to spend my career at a big company.” What is the BEST advice to give Cyrus?

A.
“Demand for that career is falling. You may not have a choice but to work for a big company.”
B.
“Actually, most web developers work remotely or at small companies.”
C.
“Big companies aren’t so bad when you get used to them.”
D.
“Don’t worry! Web developers work at companies of all sizes and can even work freelance.” HELP ASAP

Answers

Answer:

D

Explanation:

I think D is the most appropriate , since developers can technically work at any company , and a good percentage work in freelancing .

Also for answer B it specified that web developers work either at small companies or remotely , which is not limited to only these two... hope this helps.

Once the information is complete and conclusions are made, then management can make more confident business decisions. This is part of this step of market research?

present the findings
make the decision
develop the research plan
collect the information

Answers

The act of making the decision is the part of this step of market research that makes management more confident business decisions.

What is market research?

This refers to the activity of gathering market information about consumers' needs and preferences.

Some steps of a market research includes:

present the findingsmake the decisiondevelop the research plancollect the information

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Unemployment that occurs when worker's skills do not match the jobs that are available.
a. seasonal unemployment
c. cyclical unemployment
b. structural unemployment
d. frictional unemployment

Answers

Answer:

b. structural unemployment

Unemployment that occurs when worker's skills do not match the jobs that are available is called structural unemployment. Thus, its B.

What is Unemployment?

Unemployment refers to the condition of an individual who is able and willing to work, but is unable to find a job. Unemployment can have a range of negative impacts on individuals, families, and communities, including financial hardship, social isolation, and reduced quality of life.

Unemployment is typically measured and reported by national statistical agencies, using various measures of unemployment, such as the unemployment rate, labor force participation rate, and the number of individuals seeking employment.

Governments and policymakers often implement various policies and programs to address unemployment, such as job training and education programs, unemployment insurance, and economic stimulus measures.

These efforts aim to create jobs and reduce unemployment, which can help to improve the overall health and stability of the economy and society.

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Identify the tasks performed by workers in a Production career. Choose all that apply. cleaning and maintaining equipment and tools managing budgets and costs feeding materials into machines, and removing materials from machines researching and comparing prices of products and services checking and testing products or parts designing and enforcing safety procedures to the environment

Answers

Answer:

The task that is performed by the worker in the production department is cleaning and maintaining equipment and tools, feeding material into machines, removing materials from machines and checking and testing products or parts.

What is the production career?

Production personnel, in particular, are in charge of creating the final products. The labor of the production uses different types of equipment and parts of the machinery to allocate them in a systematic way. Others may work on a conveyor belt line, where each employee is responsible for their duty.

Thus, maintaining equipment, feeding materials to machinery and testing and checking parts are the right option

Explanation:

The name and title of the person you are writing to goes on the _____ line of the inside address.

A. first
B. second
C. last
D. none of the above

Answers

The recipient's address, also called the inside address, includes the name and address of the recipient of your letter in the first line, which is option A.

What is a business letter?

A business letter is a formal document written with a proper format following the professional guidelines. It is often sent from one company to another or from a company to its clients, employees, and stakeholders.

Business letters are used for the professional correspondence between individuals.

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You want to borrow $600,000 to buy an apartment, and you can only afford $4,000 a month to repay the loan. Suppose the bank charges you a fixed interest rate of 4% with monthly compounding. How long will it take you to pay off the loan

Answers

Answer :

Loan for Apartment = $ 6,00,000

Monthly repayment of Loan Installment = Principal Payment + Interest = $ 4,000

Bank Interest rate = 4% per year fixed with monthly compounding

Monthly Interest rate = 4% /12 = 0.33% = 0.0033

Number of Months be n

= [ $600000 + ( $600000 x ( ( 1+0.0033)n-1 )) ] / n = $4000

4000n = [ $600000 + ( $600000 x ( ( 1+0.0033)n-1 )) ]

Taking Log of Both Sides

Log ( 4000) + Log n = Log [ $600000 + ( $600000 x ( ( 1+0.0033)n-1 )) ]

3.6021 + Log n = 5. 7782 + (5.7782 + ( n x 0.0140 -0 )

Log 3.6021 n = 11.5564 + 0.0140 n

Taking Antilog of Both Sides

Antilog ( 3.6021 Log n ) = Antilog ( 11.5564 ) + n x Antilog ( 0.0140 )

4000 n = 1200000+ ( -3 + 0.1033 ) n

n = 300 months

It means 25 years ( 300 months / 12 ) is the period of Loan

n = 25 years

Based on the given information, it will take you 15 years to pay off the loan if you are able to afford $4,000 per month.

What is the interest rate?

Interest rate refers to the amount charged by the bank when lending any money to the borrower. The borrower has to repay the loan amount based on this interest rate along with the principal amount.

To calculate the time for payment of the loan

Loan amount = Principal + (Interest x Time)

Principal = $600,000

Interest = 4%

Time =?

$600,000 = Principal + (4% x Time)

Time = 600,000/ (4600,000)

Time = 15 years

Therefore, it requires 15 years to pay the amount of the loan.


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Receiving a payment from a debtor on account would affect the Accounts Receivable with a __________ entry.

A. Debit
B. Credit

Answers

Answer:

Credit.

Explanation:

_____ is a key indicator to how profitable a business is currently or may be in the future.

A. Market penetration

B. Market share

C. Market research

D. Market positioning

Answers

Answer:

Market share

Explanation:

...

Match the command(s) to the task it helps to complete.
remove text
Shift+Enter keys
paste text
Backspace and Delete keys
create a line break
Ctrl+V keys
create space for a new paragraph
Enter key

Answers

#Remove text

Usually backspace but delete also

B

#paste text

Ctrl+V

#Create a line break

Enter

#create space for new paragraph

Shift+Enter

Remove text: Backspace and Delete keys

Shift+Enter keys: create a line break

Paste text: Ctrl+V keys

Backspace and Delete keys: create space for a new paragraph

Create a line break: Shift+Enter keys

Ctrl+V keys: paste text

Create space for a new paragraph: Backspace and Delete keys

Enter key: create space for a new paragraph

What are commands?

Commands are instructions for computers to perform tasks. Keyboard shortcuts are specific combinations of keys that trigger commands, enhancing task efficiency. For instance, Ctrl+C copies, Ctrl+V pastes, and Backspace/Delete keys remove text.

The Enter key commands new lines or paragraphs, while Shift+Enter creates line breaks. These shortcuts streamline interactions by avoiding menu navigation. Understanding commands and their associated shortcuts empowers users to navigate software more efficiently, saving time and effort.

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If you borrow $5,400 at $800 interest for one year, what is your effective interest rate for the following payment plans? (Input your answers as a percent rounded to 2 decimal places.)

Answers

5400/800 = 0,14814 -> 14,81% Interest rate

why do we need the system of national accounts?​

Answers

Answer:

It is a statistical framework that provides a comprehensive, consistent and flexible set of macroeconomic accounts for policy making, analysis and research purposes.

Differentiate between manufacturer and Cunsumer​

Answers

Answer:

Explanation:

Industrial goods are bought and used for industrial and business use. They are made up of machinery, manufacturing plants, raw materials, and any other good or component used by industries or firms. Consumer goods are ready for the consumption and satisfaction of human wants, such as clothing or food.

What are the importance of resources forecasting.

Answers

Forecasting plays an important role in operations management.Forecasting means to make a detailed analysis of future by making assumptions about it. It is an art and science of predicting what will happen in the future.
sometimes it is done by mathematical method and sometimes by the intuition of the operations manager. The importance of forecasting by the following
concepts:
Qualitative approach: It uses factors such as
experience, instinct and emotion.
Quantitative analysis: It depends heavily on
mathematics, historical data and casual variables.
Mixed methods: A method of forecasting a
company's future performance by using different methods by using a single analyst or a series of them.
Forecasting demand: It is a process in which sales data is used to estimate costumer demand, demand forecasting helps the business estimate the total sales and revenue for a future period of time.
Delphi: In this method decision makers and
respondants all meet to develop forecast. Every
share holder in the process provides input.
Forecasting accuracy: There are so many
standards to determine forecast accuracy. The
commonly used metrics are:
Mean Absolute Deviation: ( Actual-forecast) and
Mean Absolute Percent Error = 100 * ( actual-
forecast/ actual)
Trends and patterns: It is done by looking at
possible trends from the data of past sales or
market growth and use the information to
extrapolate what could happen in the future.
Inventory forecast analytics: It is mathematical
and statistical procedures.
Optimized purchase orders: The materials
planning system generates delivery schedule lines against existing scheduling agreements.
Inventory control: The process of ensuring that
the appropriate amounts of stock are maintained by a business to meet cosumer demand without delay by keeping holding stock minimum. Forecasting and inventory management will help in predicting about future of business and making sure sufficient inventory is present to meet the public demand.

Call to actions are used in ads to...
a) Provide an easy and clear way for people who view the ad to take action and further interact
with the brand.
b) Help companies to define the goal of their ads.
c) Add extra text to an ad.
d) Make it complicated for social media users to take next steps to interact with a brand.

Answers

Call to actions are used in ads to provide an easy and clear way for people viewing the ad to take actions and further interact with the brand.

What is Call to Action?

It is a marketing strategy that helps a company achieve its goals by encouraging the target audience to interact with the organization, which can be through the use of imperative words and encouraging access to a link.

Therefore, the call to action strategy helps  to engage the consumer and encourage him to take an action that is favorable to the company.

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what does the transfer feature in qbo do

Answers

The transfer feature signifies that you may move the money from one bank or credit card account to another. This is further explained below.

What is the transfer?

Generally, a transfer is simply defined as Moving something or someone to a new location, group or organization is a common definition of this verb.

In conclusion,  You may transfer money from one bank or credit card account to another using the transfer option.

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