BUSINESS COLLEGE

CD is an all equity firm that has 10,000 shares of stock outstanding at a market price of $20 a share. The firm's management has decided to issue $50,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 5 percent.a. What are the earnings per share at the break-even level of earnings before interest and taxes? Ignore taxes.

Answers

Answer 1

Answer:

Answer:

EPS = $ 2.00

Explanation:

Earning per share: EBIT/outstanding shares

unlevered firm EPS:

oustanding shares: 10,000

Levered firm EPS:

(EBIT - interest)/outstanding shares

where:

Interest_ 50,000 x 5% = 5,000

Shares repurchase: 50,000 / 20 = 2,500

Outstanding shares: 10,000 - 2,500 = 7,500

$\left \{ {{EPS = EBIT/10,000} \atop {EPS = EBIT-5,000/7,500}} \right.$

EBIT/10,000 = (EBIT-5,000)/7,500

(0.75)EBIT = EBIT - 5,000

5,000 / (1-0.75) = EBIT

EBIT = 20,000

EPS: 20,000 / 10,000 = 2.00

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Gelb Company currently manufactures 51,500 units per year of a key component for its manufacturing process. Variable costs are $5.15 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $78,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.90 per unit. Calculate the total incremental cost of making 51,500 units and buying 51,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?

A decrease in the wage rate of pizza makers will cause a movement from Point B on supply curve Upper S 2 to ______________.A. Point A on supply curve Upper S 2.
B. supply curve Upper S 1.
C. Point C on supply curve Upper S 2.
D. supply curve Upper S 3.

Answers

Answer:

D. supply curve Upper S 3

Explanation:

Final answer:

A decrease in the wage rate of pizza makers will result in a movement from Point B to Point C on supply curve Upper S 2. This is because the decrease in production cost (with the wage rate falling) allows more pizza to be supplied at the same price.

Explanation:

The subject of your question relates to the supply curve within the field of Economics. A supply curve illustrates how the quantity of a good supplied by producers responds to a change in price. In this case, we are considering a decrease in the wage rate of pizza makers, which is a cost of production. According to the law of supply, if the cost of production decreases, it will cause an increase in the quantity supplied. Therefore, a decrease in the wage rate of pizza makers will move us from Point B to Point C on the same supply curve i.e. on supply curve Upper S 2. This is because Point C will represent a higher quantity of pizza being supplied at the same price, as lower wage rate improves the profitability of producing pizzas.

Learn more about Supply Curve Movement here:

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#SPJ2

Seller in Georgia and buyer in the Netherlands enter into a contract for the sale of goods, CIF port of Amsterdam. The seller refused to ship. The buyer brings an action for damages. In the US, a court would probably rule

Answers

Answer: b.

damages should be measured by the difference between the contract price and the market price of the goods at the port of shipment

Explanation: Because the contract has already been initiated and was defaulted by the seller. The Judge would ask him to pay for damages. And this will be measured by subtracting the contract price of the goods from the market price. I.e the price the goods would gave been sold and the price the seller accepted to sell to the buyer according to the contract they signed.

As a result of several factors, aggregate demand decreased during the Great Depression. One factor would be:

Answers

Answer: decrease in expected income

Explanation:

The Great Depression began due to the crash of the stock market in 1929 which caused fear and millions of investors lost their businesses.

This led to the reduction in consumer spending. Also, there was a reduction in investment which caused industrial output decline and decrease in employment opportunities.

Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Total budgeted fixed overhead cost for the year $ 250,000 Actual fixed overhead cost for the year $ 254,000 Budgeted direct labor-hours (denominator level of activity) 25,000 Actual direct labor-hours 27,000 Standard direct labor-hours allowed for the actual output 26,000 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

Answers

Answer:

1. The fixed portion of the predetermined overhead rate for the year is $10,000 per direct labor hour.

2. The fixed overhead budget variance is $4,000 unfavourable and the fixed overhead volume variance is $10,000 favourable.

Explanation:

In order to calculate the the fixed portion of the predetermined overhead rate for the year we would have to use the following formula:

predetermined overhead rate for the year=Total fixed overhead cost year

Budgeted direct labor-hours

=$ 250,000/25,000

=$10,000

1. The fixed portion of the predetermined overhead rate for the year is $10,000 per direct labor hour.

In order to calculate the fixed overhead budget variance, we use the following formula:

2. fixed overhead budget variance=Actual fixed overhead cost for the year- budgeted fixed overhead cost for the year

=$ 254,000-$ 250,000

=$4,000 unfavourable

In order to calculate the fixed overhead volume variance, we use the following formula:

fixed overhead volume variance=budgeted fixed overhead cost for the year-fixed overhead appliead to work in process

=$ 250,000-(26,000×10)

=$10,000 favourable

The current exchange rate of dollars to euros is $18/€11.The risk free rate for dollars is r = 3%. The risk free rate for euros is re = 4%. The dollar denominated price of an option to purchase €22 for $32 in six months is $5.09. Determine the euro denominated price of a put option to sell $22 in six months using the given strike. (Hint: the strike comes from the statement €22 for $32.)

Answers

Answer:

wow simple

Explanation:

so simple

just a little tricky

9) Selected information regarding a company's most recent quarter follows (all data in thousands). 9) _______ Direct labor $540 Beginning work in process inventory $330 Ending work in process inventory $420 Cost of goods manufactured $1620 Manufacturing overhead $830 What was the cost of direct materials used for the quarter