Modigliani and​ Miller's world of no taxes. Roxy​ Broadcasting, Inc. is currently a​ low-levered firm with a​ debt-to-equity ratio of ​/. The company wants to increase its leverage to ​/ for debt to equity. If the current return on assets is ​% and the cost of debt is ​%, what are the current and the new costs of equity if Roxy operates in a world of no​ taxes? What is the current cost of equity if Roxy operates in a world of no​ taxes?

Answer and Explanation:

The computation is shown below:

For Current  

Total assets = Debt + Equity

= 2 + 7 9

Now

Debt ratio = Debt ÷ Total assets = 2 ÷ 9  

Equity ratio = Equity ÷ Total assets = 7 ÷ 9  

Return on assets = Cost of debt × Debt ratio + Cost of equity × Equity ratio

11% = 9% × 2 ÷ 9 + Cost of equity × 7 ÷ 9  

Cost of equity × 7 ÷ 9 = 11% - (9% × 2 ÷ 9)  

Cost of equity = ( 11% - (9% × 2 ÷ 9) ) × 9 ÷ 7

= 12%

For New  

Total assets = Debt + Equity = 7 + 2 = 9

Debt ratio = Debt ÷ Total assets = 7 ÷ 9  

Equity ratio = Equity ÷ Total assets = 2 ÷9  

Return on assets = Cost of debt × Debt ratio + Cost of equity × Equity ratio

11% = 9% × 7 ÷ 9 + Cost of equity × 2 ÷ 9  

Cost of equity × 2 ÷ 9 = 11% - (9% × 7 ÷ 9)  

Cost of equity = ( 11% - (9% × 7 ÷ 9) ) × 9 ÷ 2

= 18%

Hoda is creating a report in Access using the Report Wizard. Which option is not available for adding fields using the wizard?

Tables
Queries
Reports
All are available options.

"Minimum wage laws cause unemployment because the legal minimum wage is set" 9) A) above the market wage, causing labor demand to be greater than labor supply. B) below the market wage, causing labor demand to be greater than labor supply. C) too low. D) below the market wage, causing labor demand to be less than labor supply. E) above the market wage, causing labor demand to be less than labor supply.

Fultz Company has accumulated the following budget data for the year 2017. 1 Sales: 31,450 units, unit selling price $85. Cost of one unit of finished goods: direct materials 1 pound at $5 per J pound, direct labor 3 hours at $13 per hour, and manufacturing overhead $6 per direct labor hour, j Inventories (raw materials only): beginning, 10,290 pounds; ending, 15,250 pounds. Selling and administrative expenses: $170,000; interest expense: $30,000. Income taxes: 30% of income before income taxes.
Prepare a schedule showing the computation of cost of goods sold for 2017.

Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 45% of cost in 2021, 30% in 2022, and 25% in 2023. Pretax accounting income for 2021 was $460,000, which includes interest revenue of $68,000 from municipal governmental bonds. The enacted tax rate is 25%.
Assuming no differences between accounting income and taxable income other than those described above:
Required:
1. Complete the following table given below and prepare the journal entry to record income taxes in 2021.
2. What is Southern Atlantic’s 2021 net income?

A college uses advisors who work with all students in all divisions of the college. The most useful allocation basis for the salaries of these employees would likely be: Multiple Choice number of classes offered in each division. student graduation rate. square footage of each division. number of students advised from each division. relative salaries of division heads.

Brussels Enterprises issues bonds at par dated January 1, 2020, that have a $2,000,000 par value, mature in four years, and pay 9% interest semiannually on June 30 and December 31. 1. Record the entry for the issuance of bonds for cash on January 1. 2. Record the entry for the first semiannual interest payment and the second semiannual interest payment. 3. Record the entry for the maturity of the bonds on December 31, 2023 (assume semiannual interest is already recorded).

Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $1.30 per share, and the current price of its common stock is $40 per share. The expected growth rate is 5 percent. a. Compute the cost of retained earnings (Ke). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Skyler Manufacturing recorded operating data for its shoe division for the year. Sales $4,500,000 Contribution margin 500,000 Controllable fixed costs 200,000 Average total operating assets 900,000 How much is controllable margin for the year

Calculate amortization expense
In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $4 million, patent; $5 million, trademark considered to have an indefinite useful life; and $6 million, goodwill. Burger Mania's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life.
What is the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items? (Enter your answers in dollars, not in millions.

Snowy Mountain Financial Advisors is a network of branches providing investing and financial advising services. It discloses that it uses a balanced scorecard with the following six performance measures.

Required:
Link the measures to the perspective number(s) of the balanced scorecard.

Perspective
1. Financial
2. Customer
3. Learning and growth
4. Internal business processed

Procedure Measure Prespective number
Market share
Regulatory compliance
New cutomer refresh from existing customer
Order errors
Brach profit

oneycutt Co. is comparing two different capital structures. Plan I would result in 39,000 shares of stock and $108,000 in debt. Plan II would result in 33,000 shares of stock and $324,000 in debt. The interest rate on the debt is 7 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $160,000. The all-equity plan would result in 42,000 shares of stock outstanding. What is the EPS for each of these plans

A foreign branch bank operates like a local bank, but legally Group of answer choices a branch bank is subject to only the banking regulations of its home country and not the country in which it operates. it is a part of the parent bank. a branch bank is subject to both the banking regulations of its home country and the country in which it operates. it is a part of the parent bank, and a branch bank is subject to both the banking regulations of its home country and the country in which it operates.

The Foundational 15 (Static) [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6] Skip to question [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 30 $ 12 Direct labor 20 15 Variable manufacturing overhead 7 5 Traceable fixed manufacturing overhead 16 18 Variable selling expenses 12 8 Common fixed expenses 15 10 Total cost per unit $ 100 $ 68 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Foundational 13-1 (Static) Required: 1. What is the total amount of traceable fixed manufacturing overhead for each of the two products

Which of the following best describes the type of loss covered by the Spoilage Damage insuring agreement of the ISO Equipment Breakdown Protection Coverage Form? A. The spoilage of perishable goods resulting from breakdown of covered equipment. B. Costs to replace food labels resulting from breakdown of refrigeration equipment.

Net present value LO P3
A new operating system for an existing machine is expected to cost $820,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $100,000.
A machine costs $560,000, has a $56,000 salvage value, is expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation.
Assume the company requires a 12% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
a. A new operating system for an existing machine is expected to cost $820,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $100,000. (Round your answers to the nearest whole dollar.)
b. A machine costs $560,000, has a $56,000 salvage value, is expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)

Computing Straight-Line and Double-Declining-Balance Depreciation
On January 2, 2016, Dechow Company purchases a machine to help manufacture a part for one of its key products. The machine cost $306,180 and is estimated to have a useful life of six years, with an expected salvage value of $32,760.
Compute each year's depreciation expense for 2016 and 2017 for each of the following depreciation methods.
a. Straight-line.
b. Double-declining balance.

Match each of the following terms with the correct definition:
a. additional paid-in capital
b. issued and outstanding
c. retained earnings
d. treasury stock
e. authorized share capital
f. par value

Correct Definitions:
A. The price at which each share is recorded in the company’sbooks
B. Held by investors
C. Cumulative amount of profits that have been plowed back
D. The difference between the amount of cash raised by anequity issue and the par value of the issue
E. The maximum number of shares that can be issued withoutshareholder approval
F. The amount that the company has spent

Adamson Corporation is considering four average-risk projects with the following costs and rates of return:

Project Cost Expected Rate of Return
1 $2,000 16.00%
2 3,000 15.00
3 5,000 13.75
4 2,000 12.50

The company estimates that it can issue debt at a rate of rd = 10%, and its tax rate is 30%. It can issue preferred stock that pays a constant dividend of $5 per year at $48 per share. Also, its common stock currently sells for $33 per share; the next expected dividend, D1, is $4.00; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock.

Required:
a. What is the cost of each of the capital components?
b. What is Adamson's WACC?

Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt–equity ratio is expected to rise from 30 percent to 50 percent. The firm currently has $3.3 million worth of debt outstanding. The cost of this debt is 9 percent per year. Locomotive expects to have an EBIT of $1.32 million per year in perpetuity. Locomotive pays no taxes.
a. What is the market value of Locomotive Corporation before and after the repurchase announcement?
b. What is the expected return on the firm’s equity before the announcement of the stock repurchase plan?
c. What is the expected return on the equity of an otherwise identical all-equity firm?
d. What is the expected return on the firm’s equity after the announcement of the stock repurchase plan?

Suppose Nike, Inc. reported the following plant assets and intangible assets for the year ended May 31, 2022 (in millions): other plant assets $935.0, land $220.0, patents and trademarks (at cost) $510.0, machinery and equipment $2,160.0, buildings $980.0, goodwill (at cost) $210.0, accumulated amortization $50.0, and accumulated depreciation $2,200. Prepare a partial balance sheet for Nike for these items.

You are analyzing two assets: collectible LEGO sets, and stock of Apple. In the last 5 years, LEGOs have had an annual volatility of 5%, annual return of 6%, and a CAPM beta (the correlation coefficient between the asset and the market risk-premium) of 1.6. Apple has had an annual volatility of 10%, an annual return of 8%, and a CAPM beta of 1.2. Is the following statement true or false?

According to CAPM, Apple has a higher expected return than LEGO.

The following information pertains to Lightning Inc., at the end of December: Credit Sales $ 20,000 Accounts Payable 10,000 Accounts Receivable 11,800 Allowance for Uncollectible Accounts 400 credit Cash Sales 20,000 Lightning uses the aging method and estimates it will not collect 7% of accounts receivable not yet due, 20% of receivables up to 30 days past due, and 46% of receivables greater than 30 days past due. The accounts receivable balance of $11,800 consists of $7,500 not yet due, $2,300 up to 30 days past due, and $2,000 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense

Frieda Inc. is considering a capital expansion project. The initial investment of undertaking this project is $105,500. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $22,500, $25,800, $33,000, $45,936 and $58,500 respectively. Frieda has a capital structure consisting of 20% debt and 80% equity. The after-tax cost of debt is 16% and the cost of equity is 18.5%.
What is Frieda%u2019s weighted average cost of capital?
a. 16%
b. 18%
c. 24%
d. 22%

When converting net income to net cash provided (used) by operating activities under the indirect method increases in accounts receivable and increases in accrued liabilities are deducted. decreases in accounts payable and decreases in inventory are deducted. decreases in accounts receivable and increases in prepaid expenses are added. decreases in inventory and increases in accrued liabilities are added.

Bramble Corp. purchased land as a factory site for $1305000. Bramble paid $121000 to tear down two buildings on the land. Salvage was sold for $8400. Legal fees of $5340 were paid for title investigation and making the purchase. Architect's fees were $47000. Title insurance cost $3900, and liability insurance during construction cost $4200. Excavation cost $15480. The contractor was paid $4400000. An assessment made by the city for pavement was $9900. Interest costs during construction were $251000.
1. The cost of the land that should be recorded by Wilson Co. is:_____.
a. $989,880
b. $980,480
c. $996,280
d. $986,880
The cost of the building should be recorded by Wilson Co. is:_____.
a. 2,804,840
b. 2,813,200
c. 2,803,800
d. 3,014,240

Super Clinics offers one service that has the following annual cost and utilization estimates: Variable cost per visit $ 10 Annual direct fixed costs $50,000 Allocation of overhead costs $20,000 Expected utilization 1,000 visits What price per visit must be set if the clinic wants to make an annual profit of $10,000 on the service? A. $ 70 B. $ 80 C. $ 90 D. $100 E. $110

Review each of the following independent sets of conditions. For each condition, calculate the (1) sample rate of deviation, and use the AICPA sample evaluation tables to identify the (2) upper limit rate of deviation, and (3) allowance for sampling risk (n = sample size, d = deviations. ROO = risk of overreliance). (Round your answers to 1 decimal place.)

a. n = 100. d = 8. ROO = 5%.
b. n = 100. d = 4. ROO = 5%.
c. n = 100. d = 8. ROO = 10%.

Norris Company has the following capital structure: Common stock, $1 par, 100,000 shares issued and outstanding. On October 1, 2020, the company declared a 5% common stock dividend when the market price of the common stock was $15 per share. The stock dividend will be distributed on October 15, 2020, to stockholders on record on October 10, 2020. Upon declaration of the stock dividend, Norris Company would record:

Labeau Products, Ltd., of Perth, Australia, has $21,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
Invest in Invest in
Project X Project Y
Investment required $ 21,000 $ 21,000
Annual cash inflows $ 8,000
Single cash inflow at the end of 6 years $50,000
Life of the project 6 years 6 years
The company’s discount rate is 18%.
Required:
Determine the net present values. (Any cash outflows should be indicated by a minus sign.

The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.0. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever
a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic valueS
b-1. If the market price of a share is currently $108, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price
b-2. What is your expected one-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected one-year holding-period return