Answer:
c. willing to share costs and risks of new-product development.
Explanation:
A strategic alliance is when two companies come together to carry out a project that benefits both companies while both companies still retain their independence.
If strategic alliance is carried out with a company that is opportunistic, the company might take advantage of the other company or take certain actions that would not benefit the other company.
strategic alliance has to be mutually beneficial to both companies, so, strategic goals and visions have to align.
Capabilities don't have to be the same for a strategic alliance.
I hope my answer helps you
the contractor is performing exceptionally, especially Sally, How do you as the COR recognize Sally's accomplishments?
As the Contracting Officer's Representative (COR), there are several ways you can recognize Sally's accomplishments and show appreciation for her exceptional performance. Here are a few suggestions:
Verbal recognition: Personally acknowledge Sally's achievements by expressing your appreciation directly.
Written commendation: Prepare a formal letter or email addressed to Sally, expressing your recognition and gratitude for her exceptional performance.
Public recognition: Take the opportunity to publicly recognize Sally's accomplishments during team meetings, project updates, or other appropriate forums.
Award or certificate: Consider presenting Sally with an award or certificate to commemorate her exceptional performance.
Additional responsibilities or growth opportunities: Acknowledge Sally's outstanding work by offering her new responsibilities or opportunities for professional growth.
Informing her superiors: Ensure Sally's supervisors or higher-level management are aware of her exceptional performance.
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Many people believe that the U.S. saving rate is too low. Suppose all private citizens save at a higher rate. Show what happens to investment in this case, using the saving and investment diagram, where the S/Y* curve shifts. Now show what happens to investment in the same situation using the spending share diagrams.
As the S/Y* curve goes upward and the investment share curve shifts to the right in the spending share diagram, investment rises.
The S/Y* curve in the saving and investment graphic rises upward, suggesting an increase in saving, if all private people save at a greater rate. As a result, the equilibrium point on the S/I curve shifts, increasing investment. A drop in consumption is also implied by the S/Y* curve moving upward. The investment share curve swings right in the spending share diagram, showing a rise in investment relative to consumption. When private savings rise, the saving share curve likewise swings upward, lowering consumption share. In general, a rise in personal saving causes a rise in investment and a decline in consumption.
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The Dominican Republic is considering placing a room tax on Eco Hotels. The preliminary analysis requires them to calculate consumer and producer surplus before the tax. Below are the demand and supply equations for eco hotel rooms in the Dominican Republic.
Demand equation: Qd = 2500 - 5P
Supply equation: Qs = 1OP - 500
Calculate consumer surplus. Number
Calculate producer surplus.
Answer:
The consumer surplus is 225,000
The producer surplus is 112,500
Explanation:
According to the given data we have the following:
Demand equation: Qd = 2500 - 5P
Supply equation: Qs = 1OP - 500
Therefore, the equilibrium is at demand equal to the supply
2500-5P=10P-500
15P=3000
P=200
Q=10P-500=10*200-500=1500
The inverse demand function is
P=500-0.2Q
Therefore, CS=0.5*(Pmax -Pe)*Qe
=0.5*(500-200)*1500
=225,000
The consumer surplus is 225,000
Regarding PS, maximum price or y-intercept of the demand curve
Pe and Qe are equilibrium price and quantity the inverse supply curve
P=50+0.1Q
PS=0.5*(Pe-Pl)Qe
Pl=y intercept of supply curve
PS=0.5*(200-50)*1500
=112,500
The producer surplus is 112,500
common stock definition.
Answer:
Common stock is a security that represents ownership in a corporation.
Explanation:
Holders of common stock elect the board of directors and vote on corporate policies.
Suppose a firm manager has a base salary of $175,000 and earns 0.5 percent of all profits. Determine the manager's income if revenues are $10,000,000 and profits are $5,000,000. A) $150,000 B) $200,000 C) $225,000 D) $300,000
The manager's income is $200,000.
The option (B) is correct.
The expression "income" for the most part alludes to how much cash, property, and different exchanges of significant worth got over a set timeframe in return for administrations or items. There is no single, standard definition: pay is characterized by the setting in which the idea is utilized.
Income includes monetary as well as non-financial upsides of recompenses and perquisites. All pay is available under personal expense except if explicitly excluded.
Given;
Fixed salary = $175,000
Earns 0.5% of all profits
Profit = $5,000,000
Manager income = Fixed salary + 0.005 * Profit
Manager's income = $175,000 + 0.005 * $5,000,000
=> Manager's income = $175,000 + $25000
=> Manager' income = $200,000
Thus, the manager's income is $200,000.
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Selected transactions for the Joel Berges Company are presented in journal form below.
Date Account Titles and Explanation Ref. Debit Credit
5-May Accounts Receivable 4,100
     Service Revenue 4,100
       (Billed for services performed)
12 Cash 2,400
    Accounts Receivable 2,400
      (Received cash in payment of account)
15 Cash 3,000
    Service Revenue 3,000
       (Received cash for services performed)
Required:
Post the transactions to T-accounts and determine each account's ending balance.
Answer:
1. Cash
Date Amount Date Amount
12 May $2,400
15 May $3,000
Ending Bal. $5,400
2. Account Receivables
Date Amount Date Amount
5 May $4,100 12 May $2,400
Bal C/D $1,700
$4,100 $4,100
Ending Bal. $1,700
3. Service Revenue
Date Amount Date Amount
5 May $4,100
15 May $3,000
End Bal. $7,100
Why are marketers putting so much emphasis on developing strong brands?
It costs a company $35,000 to produce 700 graphing calculators. The company’s cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators. d. What is the minimum price the company will charge for the 701th calculator?
Currently, the company is making 700 graphing calculators. Therefore, the company will only charge a minimum of $70 for the 701st calculator.
Total cost - extra cost is the minimum price.
$35,070 - $35,000 = $70
The firm's starting price will be $70.
The lowest price that can be legally set is known as a minimum price, such as the minimum salary or the price of alcohol. a base price. A minimum price establishes the lowest amount at which a good or service may be offered legally. The reduction in consumption of the good, which would increase society's welfare, is the desired outcome. The price producers get may rise with minimum prices. They have been utilized in farming to boost farmers' incomes.
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Select the correct answer how many justices must agree to an opinion for the Supreme Court to issue a decision
A majority of the justices, or five out of the nine on a full Court, must agree. The opinion has been written at this point. This is the court's judgment in writing.
What is the significance of the Supreme Court?In our system of government based on the Constitution, the Supreme Court is incredibly significant.
First and foremost, it acts as the final resort for anyone looking for justice because it is the nation's highest court. Second, it is crucial for ensuring that each arm of government understands the boundaries of its own authority because of its ability to conduct judicial reviews.
Third, it defends civil liberties and rights by overturning unconstitutional legislation. Finally, it establishes reasonable boundaries for democratic government by preventing popular majorities from passing legislation that discriminates against or unfairly benefits unpopular minorities.
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Tim thinks his buyers are ready to make an offer. He asks, “Which one of the children gets the basement bedroom with the private entrance?” What kind of closing technique is Tim using?
A 1990 Naval Aerospace Research Laboratory Study noted that the fixations that occur during a scan require about 18 seconds.
A. True
B. False
What can a government do to best redistribute wealth?
A. Put tariffs and duties in place to collect revenue.
B. Offer government-owned lands for sale to the public.
C. Encourage the creation of small businesses by means of grants.
D. Adopt of a progressive tax system.
The monthly demand for a part is 1,500 units.
(a) EOQ, (b) annual holding cost, (c) annual order cost, and (d) annual total inventory cost.
Explanation:
Jhfhfnfbsnnfnf is a great place to work
M/J Business Keyboarding Guided Notes Module 1
Module 1: Keyboarding Basics
1.1 The Basics
Vocabulary Terms
touch typing
muscle memory
ergonomics
repetitive strain injuries (RSI)
carpal tunnel syndrome
Guided Questions
How can you arrange your workstation to
apply proper ergonomics?
When typing, what are the characteristics of
correct ergonomics and proper typing
posture?
How do correct ergonomic habits contribute
to proper keyboarding and prevent injury
when typing?
What are some strategies you should follow
to prevent RSI?
When working on a laptop or on a tablet,
how can you apply proper ergonomics?
What do you need to know about the
QWERTY keyboard to learn how to type?
Where are these keys located on the
keyboard and what is the purpose of each?
Home Row / Home Keys, Spacebar, Shift,
Enter, Tab, Backspace, Caps Lock
How should you position your fingers on the
home row?
Why is using the home row important to
typing mastery?
How do the buttons and special keys help
you navigate the Typing Tool?
M/J Business Keyboarding Guided Notes Module 1
1.02 Home Row F and J
Vocabulary Terms
workstation
ergonomics
home row keys
typing technique
Guided Questions
Where should you position your fingers to
before you start typing?
How can you find the F and J keys without
looking at the keyboard?
Which finger do you use to type the F key?
The J key? The space bar?
1.03 Input, Output, Storage, and Memory
Vocabulary Terms
Central Processing Unit (CPU)
peripherals
input device
output device
USB (Universal Serial Bus) connector
memory
storage memory
random access memory (RAM)
read-only memory (ROM)
storage devices
Guided Questions
What is the purpose of each of these
computer peripherals? What are examples
of each?
o an input device
o an output device
Which peripherals can be both and input
and output devices?
How do input and output devices connect to
a computer?
What is the purpose of different types of
computer memory? What are examples of
each?
What is the purpose different storage
devices? What are examples of each?
What is “the cloud?”
1.04 – 1.06: Home Row D and K / Home Row S and L / Home Row A and ;
M/J Business Keyboarding Guided Notes Module 1
Vocabulary Terms
home row
workstation
ergonomics
typing technique
Guided Questions
Where should you position your fingers to
before you start typing?
Which finger do you use to type each of
these keys?
D K S L
A ; Space Bar
1.07 Computer Maintenance
Vocabulary Terms
Guided Questions
Why is it important to properly care for your
computer and electronic devices?
What are some things you should DO and
should NOT DO to properly care for your
computer (hardware and software)?
Why are software updates important?
Why is it important to clean your computer
and workspace regularly?
How should you clean each of these
computer parts? Why?
o keyboard
o mouse or trackpad
o screen or monitor
1.08 Home Row G, H, Enter
Vocabulary Terms
reach keys
home row
workstation
ergonomics
typing technique
Guided Questions
Which keys are the reach keys?
Where should you position your fingers to
before you start typing?
Which finger do you use to type these keys?
G H ENTER
Space Bar
M/J Business Keyboarding Guided Notes Module 1
1.09 Home Row Review
Vocabulary Terms
Guided Questions
What are the different parts/components of
a computer system and why are they
important?
Why are storage devices (USB flash drives,
external hard drives, and cloud storage)
helpful?
Why is it helpful to know the parts of a
computer system and how to care for it?
What are some proper computer
ergonomics practices to type pain free and
avoid injury?
What do you remember about which fingers
to use when typing the home row keys?
Left Hand
Fingers Keys Keys Right Hand
Fingers
pinky finger pinky finger
ring finger ring finger
middle finger middle finger
index finger index finger
thumb thumb
Answer: thanks
Explanation:
3. Compare the costs and benefits of low- versus high-risk investments. Then, explain what
diversification is and how it offers a balanced alternative to these two types of investments.
WILL MARK BRAINLIEST I NEED ASAP !
Low-risk investments such as government bonds and savings accounts offer stability and security but have lower returns. High-risk investments such as stocks and mutual funds offer higher potential returns but come with a higher risk of loss. Diversification is a strategy that involves spreading investments across different asset classes, industries, and geographies to reduce risk exposure and potentially increase returns. It offers a balanced alternative to low- and high-risk investments by reducing the risk of significant losses if one investment underperforms.
What is the cost and benefit of low-risk to high-risk investmentLow-risk investments typically offer lower returns but also come with a lower chance of losing money. These types of investments include government bonds, savings accounts, and other similar investments that are considered to be relatively stable. The main benefit of low-risk investments is that they provide a safe place to park your money without risking significant losses.
On the other hand, high-risk investments such as stocks, mutual funds, and real estate have the potential to offer higher returns, but also come with a higher chance of losing money. These types of investments are typically more volatile and subject to market fluctuations, which can result in significant losses. The main benefit of high-risk investments is that they offer the potential for greater returns over the long term.
Diversification is a strategy that involves spreading your investments across a range of asset classes, industries, and geographies. By diversifying your investments, you can reduce your overall risk exposure and potentially increase your returns over the long term. The idea behind diversification is that if one investment performs poorly, the losses will be offset by gains in other investments.
For example, if you invest all of your money in a single stock and that stock performs poorly, you stand to lose a significant amount of money. However, if you diversify your investments across a range of stocks, bonds, real estate, and other asset classes, you reduce the risk of significant losses if one investment underperforms.
In summary, low-risk investments offer stability and security, while high-risk investments offer the potential for higher returns but come with a higher chance of loss. Diversification is a strategy that can help you achieve a balanced approach to investing by spreading your investments across a range of asset classes and reducing your overall risk exposure.
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- Any four major manufacturing firms of Nepal.
4 major manufacturing firms in Nepal
Nepal Lever Ltd.Himalayan Snacks Pvt. Ltd.Unitech Nepal Pvt. Ltd.Gorkha Brewery Pvt. Ltd.Nepal Lever Ltd. has 3 divisions homecare, Beauty and personal care and has a long history going back to the 1950s, it has FnR that aims for consistent, competitive, profitable and responsible growth.
Himalayan Snacks Pvt. Ltd. was established in 1900 and deals in supplying and trading noodles, foodstuffs, etc. The supplier company is located in Kathmandu, Bagmati.
Unitech Nepal Pvt. Ltd. offers a variety of products and services, some of which are software development, e-web development, mobile application development, digital marketing and IT consulting.
Gorkha Brewery Pvt. Ltd. deals with the production and distribution of alcoholic beverages and was established in 1989 in Kathmandu, Nepal.
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QUESTION TWO HEEKS Associates Co. Ltd is considering investing in one of two proposed short-term portfolios of four short-term financial investments. The correlation between the returns of the individual investments is believed to be negligible in both options proposed. The market return is estimated to be 15%, and the risk-free rate 5%. Portfolio 1 Investment A B C D Portfolio 2 Investment A B C D Amounts invested (TZS) 10,000,000 40,000,000 30,000,000 20,000,000 Amounts invested (TZS) 20,000,000 40,000,000 20,000,000 20,000,000 Expected Total return risk 20% 8 22% 24% 26% Expected return 18% 20% 22% 16% 10 11 9 Total risk 7 9 12 13 Beta 0.7 1.2 1.3 1.4 Beta 0.8 1.1 1.2 1.4 Required: a) Calculate the risk and return of the two portfolios using the principles of both portfolio theory and the CAPM. b) Which portfolio appears to be more efficient?
Portfolio 1: Expected Return 1: 19.6% , Total Risk (σ1): 5.5%
CAPM Expected Return 1: 51%, CAPM Total Risk (σ1): 49.5
Portfolio 2: Expected Return 2: 19.2%, Total Risk (σ2): 4.7%
CAPM Expected Return (E(R2)): 50%, CAPM Total Risk (σ2): 48.1
a) Portfolio Risk and Return Calculation:
Using Portfolio Theory:
For Portfolio 1: Expected Return 1 = (Weight A * Return A) + (Weight B * Return B) + (Weight C * Return C) + (Weight D * Return D) Expected Return (E(R1)) = (0.1 * 18%) + (0.4 * 20%) + (0.3 * 22%) + (0.2 * 16%)
= 1.8% + 8% + 6.6% + 3.2%
Expected Return 1 = 19.6%
Total Risk (σ1) = √[(Weight A^2 * Risk A^2) + (Weight B^2 * Risk B^2) + (Weight C^2 * Risk C^2) + (Weight D^2 * Risk D^2)] Total Risk (σ1) = √[(0.1^2 * 7^2) + (0.4^2 * 9^2) + (0.3^2 * 12^2) + (0.2^2 * 13^2)]
= √[0.49 + 12.96 + 10.08 + 6.76] Total Risk (σ1) = √30.29
Total Risk (σ1) = 5.5%
For Portfolio 2: Expected Return 2 = (0.2 * 18%) + (0.4 * 20%) + (0.2 * 22%) + (0.2 * 16%)
= 3.6% + 8% + 4.4% + 3.2%
Expected Return 2 = 19.2%
Total Risk (σ2) = √[(0.2^2 * 7^2) + (0.4^2 * 9^2) + (0.2^2 * 12^2) + (0.2^2 * 13^2)]
= √[0.98 + 12.96 + 2.88 + 5.32] = √22.14
Total Risk (σ2) = 4.7%
Using CAPM:
For Portfolio 1: Expected Return 1 = Risk-Free Rate + (Beta A * Market Risk Premium) + (Beta B * Market Risk Premium) + (Beta C * Market Risk Premium) + (Beta D * Market Risk Premium) Expected Return (E(R1))
= 5% + (0.7 * (15% - 5%)) + (1.2 * (15% - 5%)) + (1.3 * (15% - 5%)) + (1.4 * (15% - 5%))
= 5% + (0.7 * 10%) + (1.2 * 10%) + (1.3 * 10%) + (1.4 * 10%)
= 5% + 7% + 12% + 13% + 14%
Expected Return 1 = 51%
Total Risk (σ1) = Beta-Weighted Standard Deviation = (Beta A * Risk A) + (Beta B * Risk B) + (Beta C * Risk C) + (Beta D * Risk D)
= (0.7 * 7) + (1.2 * 9) + (1.3 * 12) + (1.4 * 13)
= 4.9 + 10.8 + 15.6 + 18.2
Total Risk (σ1) = 49.5
For Portfolio 2: Expected Return 2 = 5% + (0.8 * (15% - 5%)) + (1.1 * (15% - 5%)) + (1.2 * (15% - 5%)) + (1.4 * (15% - 5%))
= 5% + (0.8 * 10%) + (1.1 * 10%) + (1.2 * 10%) + (1.4 * 10%)
= 5% + 8% + 11% + 12% + 14%
Expected Return 2 = 50%
Total Risk (σ2) = (0.8 * 7) + (1.1 * 9) + (1.2 * 12) + (1.4 * 13)
= 5.6 + 9.9 + 14.4 + 18.2
Total Risk (σ2) = 48.1
Based on these metrics, Portfolio 2 appears to be more efficient since it has a slightly lower total risk while still offering a high expected return.
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Explain the characteristics of public limited companies
Explanation:
Life span
Number of shares
Financial privacy
The Domingos family bought a new refrigerator. How much more or less is the amount they spent than the amount they budgeted?Budgeted: $1,345.60 Spent: $1,354.66
you lose your job as a result you purchase more campbell’s soup. This inflation shows that you considered campbells soup to be a
The increased purchase of Campbell's soup after losing a job reflects considering it as a reliable option during inflationary times.
The decision to purchase more Campbell's soup in response to losing a job can be attributed to the concept of inflation. Inflation refers to the general increase in prices of goods and services over time, resulting in the eroding purchasing power of money.When facing a loss of income or job insecurity, individuals often seek to maximize the value of their money by purchasing goods that they perceive as having stable or increasing value. In this case, the individual may consider Campbell's Soup as a reliable choice due to its reputation, long-standing presence in the market, and the perception that its value will hold or increase even during inflationary periods. Therefore, purchasing Campbell's soup can be seen as a strategy to protect against the eroding effects of inflation and maintain some level of stability in uncertain times.For more such questions on Inflationary:
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14. On January 1, Nick Co. purchased a delivery truck for $60,000. The truck's salvage value is $2,000, and its estimated useful life is 10 years. The productive life of the truck is estimated to be 100,000 miles. During the first year, the truck was driven 19,000 miles. Nick uses the double-declining balance method of depreciation. What amount of depreciation expense should Nick record for the first year
Answer: $12000
Explanation:
The amount of depreciation expense that Nick should record for the first year will be:
The depreciation will be:
= 1/no. of years
= 1/10
= 10%
Then, the rate of depreciation for double-declining will be:
= 10% × 2
= 20%
Then, the depreciation for the first year will be:
= $60000 × 20%
= $60000 × 0.2
= $12000
Therefore, the amount of depreciation expense that Nick should record for the first year is $12000.
Depreciation expense should Nick record for the first year is $12000
You have invested $6,000 in plant improvements and financed $6,000 long-term debt to pay for it. You have also elected to retire $6,000 of long-term debt. Now, your closing cash position reads -$3,000. How can you fix the current financial decisions so that you have a healthy cash position at the end of the year?
Answer:
Retire Long Term debt at $0Issue Long Term Debt at $6,000Explanation:
If you elect to both retire the $6,000 in long term debt and also issue long term debt of the same amount, your cash balance would be -$3,000 which is unhealthy.
What you should do therefore, is to retire no long term debt while still issuing the long term debt of $6,000 to pay for the investment in plant improvement. This will leave you with a cash balance of $3,000 which is healthy enough.
When an index return equals the weighted average of the returns of each component security, with weights proportional to outstanding market value, it is referred to as a market ________________ ________________ index.
To get the weighted average, add the results after dividing each value by its weight. Add the weights of each variable separately.
Calculation: The price-weighted index is [($16 + $61 + $38/3). - [($21 + $49 + $37 / 3)] 7.48 percent equals (($21 plus $49 plus $37/3)) What does "weighted" actually mean? Weighted We designed and structured "we" (plural "we. td") in a way that is more likely than not to result in a particular outcome, usually an advantage: Higher educated people are favoured by the system, which is biased in their favour. Just how are the weights determined? To get the weighted average, add the results after dividing each value by its weight. Add the weights of each variable separately, multiply the result, then divide by the total weights if the numbers do not even add up to one.
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1. Ryan can show Delia homes listed with XYZ Realty and other brokers in the market if:
(a) None of the homes are owned by Agent Ryan
(b) Ryan discloses to Broker Bradley that he will show homes listed by XYZ Realty
(c) Delia gives verbal consent to see homes listed by XYZ Realty
(d) Delia has given written Intermediary consent
Ryan can show Delia homes listed with XYZ Realty and other brokers in the market if:
Delia has given written Intermediary consent Delia gives verbal consent to see homes listed by XYZ Realty None of the homes are owned by Agent RyanWhen can homes be shown in the marketDelia gives verbal consent to see homes listed by XYZ Realty: This condition highlights the significance of Delia's consent. If Delia explicitly gives verbal consent to Ryan, it signifies that she is comfortable with viewing homes listed by XYZ Realty. Delia's consent is crucial in allowing Ryan to proceed with showing homes from XYZ Realty.
(d) Delia has given written Intermediary consent: This condition specifically refers to written consent in the form of an intermediary agreement. In some cases, Delia may choose to engage Ryan as an intermediary, authorizing him to show homes listed by multiple brokers, including XYZ Realty.
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Kitchel told Parker that he needed a couple of weeks to think about his proposal. How should Parker handle this
Answer: Parker should close the deal quickly
Explanation:
Giving Kitchel so much time to go over the proposal is not ideal because in that time events could happen that would ensure Kitchel stayed with their current supplier such as the current supplier finding out and offering better terms thereby enticing Kitchel to stay.
It is imperative therefore that Parker close the deal as quickly as possible. He can do this by offering time conscious incentives that require that Kitchel order fast, he could even go meet Kitchel in person and press his claim and even hit hard at the weakness of Richmond's current supplier by stating that he would deliver things ahead of schedule.
In your own words write a definition for ecology ?
Answer:
the study of an organism sorrundings and the interactions between the organisms(them).
Explanation:
A European call and put option on the same security both expire in three months, both have a strike price of 20, and both sell for the price 3. If the nominal continuously compounded interest rate is 10% and the stock price is currently 25 , identify an arbitrage.
Answer:
Call payoff = Max [0, Stock price - Strike price]
Call payoff = Max[0,25-20]
Call payoff = 5
Put payoff = Max[0, strike price - stock price]
Put payoff = max[0,20-25]
Put payoff = 0
Strike price = K = 20
Stock price = S = 25
interest rate = 10% = 0.1
Time to expiry = T = 3 months = 3/12 = 0.25
Put call parity: C + K*Exp(-r*T) = P + S
C = P + S - K*Exp(-r*T)
Call = 3 + 25 - 20*exp(-0.1*0.25)
Call = 28 - 19.5062 =
Call = 8.4938 > 3
So, yes there is an arbitrage . Implied value is 8.4938 but trades at 3.00; Call option is trading cheap hence we should buy more call options.
What are the characteristics of a free market economy??
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.
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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Rational investor's are motivated to purchase an asset because of its