The figure is drawn for a monopolistically-competitive firm. Price 140 123.33 90 90 56.67 100 133.33 MR What is this firm's profit? Here's a hint: profit = Qx(P-ATC) a. $14,000 b. $0 c. $9,000 d. none of the above MC ATC Demand Quantity
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- Consider a company that pays out all its earnings (i.e., the payout ratio = 1 or plowback/retention ratio=0). The required return for the firm is 13%. Compute the intrinsic P/E if its ROE is 15%. Compute the intrinsic P/E if its ROE is 20%. Discuss why your answers to parts (a) and (b) differ or do not differ from one another. Suppose that the company’s ROE is 13%. Compute its intrinsic P/E value. Would the answer to part (d) change if the company retained half of its earnings instead of paying all of them out? Discuss why or why not.NEED ASAP. THANK YOU!! 1. Which of the following statements is correct? Group of answer choices - Higher sales usually require higher asset levels, and this leads to what we call AFN. However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio. - If a firm’s assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm’s AFN to be negative. - Dividend policy does not affect the requirement for external funds based on the AFN equation. - AFN is not always positive. - If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm’s actual AFN must, mathematically, exceed the previously calculated AFN.2. When we use the AFN equation to forecast the additional funds needed (AFN), we are implicitly assuming that all financial ratios are constant. Group of answer choices - True…Consider an economy with distress costs and corporate tax rates. Consider further a firm with EBIT corporate tax rate tau 0.3. What is the optimal leverage ratio (D/V)? 100 constant, rA 10%, rD 5%, distress costs 0.0005*D^2,
- Give typing answer with explanation and conclusion Suppose Abraxas Corp. has an equity cost of capital of 8.2%, market capitalization of $11.37 billion, and an enterprise value of $17.12 billion. Suppose Abraxas's debt cost of capital is 5.6% and its marginal tax rate is 21%. What is Abraxas's WACC?Instructions: Assume the following data for two firms (U = unlevered firm) and (L = levered firm). Assume the two firms are in the same risk class when it comes to business risk. Both firms have EBIT = €1000 000. Firm U has zero debt and its required rate of return (KsU = 12%). Firm L has €2000 000 debt and pays 10% interest rate. Based on the data provided, answer the following questions and show all your computations and interpret your results. Find the value of unlevered (U) and levered (L) firms under zero corporate tax assumption. Find the market value of the firm’s L’s debt and equity. Do 1 and 2 under the assumption of corporate tax = 60%Suppose the profitable company, Hermes, Inc., previously calculated its external financing needs (EFN) to be $18,200,000. What will happen to the EFN if management now decides to decrease the dividend payout ratio from 35.00% to 25.00%? (1) It will increase to some value greater than $18,200,000. (2) It will fall to some value lower than $18,200,000. (3) It will remain at $18,200,000. (4) The answer depends on Hermes, Inc.’s growth rate in sales. (5) The answer depends on Hermes, Inc.’s profit margin.
- Calculate the following values:a) Value of Unlevered Firm Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table. Table 1: Information of the firms Unlevered firm Levered firm EBIT 10,000 10,000 Interest 0 3,200 Taxable income 10,000 6,800 Tax (tax rate: 34%) 3,400 2,312 Net income 6,600 4,488 CFFA 0 -3,200 Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5Calculate the FCF for a firm if it has operating cash flows of 500, CAPEX of 320, and a change in NWC of -18. Assume a tax rate of 40%. Hint: Even if an input value is negative, you still apply the formula with the minus signs. FCF = operating CF - CAPEX - change in NWC Also a reminder, FCF = CF from assetsPlease show your work for the following Suppose that your firm's current unlevered value, V*, is $800,000, and its marginal corporate tax rate is 21 percent. Also, you model the firm's PV of financial distress as a function of its debt level according to the relation: PV of financial distress = 800,000 × (D/V*)2. What is the firm's levered value if it issues $200,000 of perpetual debt to buy back stock? Multiple Choice A) $920,000. B) $869,555. C) $792,000. D) $350,000.
- If we know that a firm has a net profit margin of 4.5 % total asset turnover of 0.65, and a financial leverage multiplier of 1.47, what is its ROE? What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity?As a consultant to Bass Inc, you have been provided with the following data D1= $0.67, P0= $27.50 and gl=8%. What is the cost of common from invested earning based on the dividend growth approach? (11.51%, 10.44%, 9.91%, 9.42%, or 10.96%)If we know that a firm has a net profit margin of 4.3 %, total asset turnover of 0.77, and a financial leverage multiplier of 1.36, what is its ROE? What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity?
