An unlevered company with a cost of equity of 15% generates $7 million in earnings before interest and taxes (EBIT) each year. The decides to alter its capital structure to include debt by adding $2 million in debt with a pre-tax cost of 8% to its capital structure and using the proceeds to reduce equity by a like amount as to keep total invested capital unchanged. The firm pays a tax rate of 39%.

Assuming that the company's EBIT stream can be earned into perpetuity and that the debt can be perpetually issued (or rolled), what is the value of the equity of the levered company?

An unlevered company with a cost of equity of 16% generates $4 million in earnings before interest and taxes (EBIT) each year. The decides to alter its capital structure to include debt by adding $2 million in debt with a pre-tax cost of 4% to its capital structure and using the proceeds to reduce equity by a like amount as to keep total invested capital unchanged. The firm pays a tax rate of 39%.

Assuming that the company's EBIT stream can be earned into perpetuity and that the debt can be perpetually issued (or rolled), what is the firm's new debt-to-equity ratio?

Dean made a statistical estimation of the cost-output relationship for a shoe store. The data for the firm is given in the following table. x 4.5 7 9 10 15 20 33 50 y 3 3.3 3.4 3.5 4.5 5.5 7.5 12 Here x is the output in thousands of pairs of shoes, and y is the cost in thousands of dollars. A. Determine the best-fitting line (using least squares). S1(x) = Incorrect: Your answer is incorrect. r2 = B. Determine the best-fitting quadratic (using the least squares) and the square of the correlation coefficient. S2(x) =

SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine has an expected useful life of four years and an expected salvage value of $40,000. The company expects to use the machine for 1,300 hours in the first year, 1,900 hours in the second year, and 900 hours in the third and fourth year, respectively.

(a) Calculate Depreciation Expenses for each year using Straight-Line Method

(b) Calculate Depreciation Expenses for each year using Double-Declining-Balance Method

A working table is provided on the next page.

(c) Calculate Depreciation Expenses for each year using Units of Production Method

Working Table for Double-Declining-Balance Method

1.   Does the mean cost of a 1999 Honda Civic differ by location? To answer this question, a researcher with a lot of free time collected data on recent sales of these cars for four major cities, which is shown in the table below.

Notice: It’s 10 cars for each city. They’re not in any particular order.

Calculations notes
You’re going to go through the calculations to find the p-value from the data, but you can check all the calculations by using Excel, a calculator, or something else.
The calculations for this module are way more complicated than we’ve seen before, so please ask if you’re not sure. There’s also an Excel file on D2L where you can see the formulas to see where each number comes from.

a.   Write hypotheses appropriate to test the question here.

b.   A comparison boxplot of the prices is shown below. Based on the boxplot, does it appear the mean selling price for the cars is the same for every city? Explain your answer with evidence from the boxplot.

c1.   Calculate the mean price for each city.
c2.   Calculate the variance of the means.
c3.   Multiply that value by 10 to get the MST. (10 because its 10 observations / city.)
d1.   Calculate the variance in price for each city.
d2.   Calculate the mean of the variances. This is the MSE.
e.   Calculate the F-ratio as F = MST/MSE
f.   To calculate the p-value, we need the numerator df and the denominator df. What are those?
g.   What is the p-value for the test?
h.   Based on your p-value, make a conclusion with the context of this situation.

Below is a table that represents price, output, cost, revenue and profit data for a monopoly.

(a) Fill in the missing numbers for Firm B. Note: there are no numbers for MR and MC when Q=0. When output level is 4, the Average Total Cost is $320. When output level is equal to 8 the Total Variable Cost is equal to $700.

(b) At which unit of output does this Firm first start to experience Diminishing Marginal Returns (also know as Decreasing Marginal Returns). Explain your answer.

(c) Determine the TFC for Firm B. Explain how you got your answer.

(d) If this firm is to produce in the Short Run, then determine the output where this firm maximizes its profits or minimizes its loss. Using MC and MR, explain your answer.

(e) ) If this firm is to produce in the Short Run, then determine its best profit number.

(f) If this firm shuts down in the Short Run, what is this firm's profit number?

(g) Will this firm produce or shut down in the short run? Please explain your answer.

(h) What will this firm do in the long run: stay or leave? Please explain your answer.

Users of federal lands and nearby businesses do not pay the cost of the services provided for them by the federal government. Are these subsidies (which are paid for by taxpayers from throughout the country) appropriate, or should users of federal lands and services pay their fair market value? 150 words minimum.

5. Explain why Marginal Cost will initially decline and then increases as the number of products produced increases.

6. Explain why Average Total Cost will initially decline and then increases as the number of products produced increases.

7. Explain why Average Fixed Cost only declines as the number of products increases.

8. Explain how Long-Run Average Total Cost is determined

9. Provide reasons why Long-Run Average Total Cost would decline, stay constant, and increase.

10. Give at least 2 reason why a firm would achieve Economy to Scale.

Compute the MIRR statistic for Project I if the appropriate cost of capital is 13 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Project I Time: 0 1 2 3 4 Cash flow –$11,500 $5,580 $4,430 $1,770 $2,250 MIRR % Should the project be accepted or rejected?

Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%.

8. Find the net present value (NPV) of Project A’s projected cash flows.

9. Find the Internal Rate of Return (IRR) Project A’s projected cash flows.

10. Find the Profitability Index (PI) of Project A’s projected cash flows.

11. Find the Modified Internal Rate of Return (MIRR) for Project A’s projected cash flows.