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Gonzales, Inc. financed a new product as follows:
$5 million in stock sales at 13.7% per year, $2 million
in
through convertible bonds at 7.8% per year. The
company’s WACC is closest to:
(a) 9% per year
(b) 10% per year
(c) 11% per year
(d) 12% per year
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- Lodi Enterprises uses an after-tax MARR of 15% per year. If the company’s effective tax rate (federal, state, and local taxes) is 38%, determine the company’s before-tax MARR.Authentic Serai Halia is a catering firm that serves variety of authentic traditional Malaysian cuisine. Wasimuddin AW and Saprang J, the restaurant owners want to expand their successful operations to caterfoods for some major events in a neighboring town. After investigating their market segment, they have narrowed their choices to two proposals. First proposal is to project a capacity of 10 events per month.This would result in a cost of RM2,500 a month plus a cost of RM250 per event. Another proposal would have a capacity of 20 events per month, a cost of RM3,200 per month, and a cost of RM190 per event. The firm would charge RM480 for each event. Determine: (a) The break-even volume for each proposal.(b) The profit (or loss) would each proposal produce if monthly demand is 12 events.(c) If monthly demand is 25 events, which proposal would yield the greater profit?Define economic feasibility
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