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Streiber Publishing is an all-equity firm that generates perpetual EBIT of $2.5M per year. Their after tax all equity discount rate is 20%. The corporate tax rate is 34%.
a. What is the value of Streiber?
b. If they do the debt for equity swap to include $600,000 worth of debt, what is the value of the firm?
c. Explain the difference in your answers.
A decrease in demand for labor decreases the quantity of labor demanded at all price levels. Assuming the shift in demand is due to a slowing economy, what is the result?
“Consumer surplus” represents the difference between what a consumer is willing to pay for a good or service and the price that they actually pay. In other words, the concept of consumer surplus indicates how much consumers gain from consuming goods ..
Suppose that the U.S. noninstitutional adult population is 206 million and the labor force participation rate is 67%. What us the size of the labor force? If 72 million out of the 206 million adults are not working, what is the unemployment rate?
Demand is defined by P=250-2Qd. Suppose that marginal cost is MC=Q where Q is the quantity produced by the monopoly. Find the monopoly quantity. Find the monopoly price. Is profit equal to producer surplus here?
The community of Upper Snowshoe has expanded its winter tourism very rapidly. Three years ago, it built a new 16,000 kW power plant for $4,500,000. The local construction cost index was 157 at that time and has risen to 170 now. What is the estimated..
Three alternatives have the following cost and annual benefit data associated with them: Data Alt. 1 Alt. 2 Alt .3 Useful Life, Years 10 10 10 First Cost $1,325,000 $1,980,000 $1,650,000 Annual Benefit 265,000 589,000 435,000 Annual M&O Costs 95,000 ..
The own price elasticity of demand for the product has been estimated to be -1.25. Calculate the profit-maximizing price that the firm should charge.
There are two types of electric pencil-sharpener producers. “High-quality” manufacturers produce very good sharpeners that consumers value at $14. “Low-quality” manufacturers produce less good ones that are valued at $8. Suppose that the sale of low-..
A company is considering two alternatives for manufacturing a certain part. method R will have a first cost of 40,000, an annual operating costs of 25,000 $, and a 10,000 $ salvage value after its f8ve year life. Method S will have an initial cost of..
Illustrate what can you say about the change in equilibrium price and quantity.
In the classical theory what factor determines aggregate demand, which in turn determines the price level? According to classical theory what three factors lead to long-term economic growth?
Suppose you are considering investing in a pharmaceutical company that is developing a new treatment for an incurable disease. If it is successful, the company’s stock price will increase from $30/share to $40/share. If the new treatment fails, the s..
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