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1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000.a. What is the operating income (EBIT) for both firms?b. What are the earnings after interest?c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b.d. Why are the percentage changes different?
How could hurricane revise its invoicing policy and make its denomination decision to achieve low financing costs without excessive exposure to exchange rate fluctuations?
Write a short paper advising Bill and Darlene what business form you would recommend for them as they start up their business. State any assumptions you make.
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Daily marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily enterprises. What are the incremental free cash flow associated with the new machine?
i explore local issues in your community that affect the education of diverse students. possible issues may include but
Firms often involve themselves in projects that do not result directly in profits. For example, IBM and ExxonMobil frequently support public television broadcasts. Do these projects contradict the goal of maximization of shareholder wealth?
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Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:
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Calculate the amount of capital funding The Fitness Studio raised through this debt offering.
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