Answer | | If new debt is used to refund old debt, the correct discount rate to use in the refunding analysis is the before-tax cost of new debt. | | | The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity. | | | The mechanics of finding the NPV of a refunding decision are fairly straightforward. However, the decision of when to refund is not always clear because it requires a forecast of future interest rates. | | | If a firm with a positive NPV refunding project delays refunding and interest rates rise, the firm can still obtain the entire NPV by locking in a low coupon rate when the rates are low, even though it actually refunds the debt
As the time horizon increases, variable costs rely less on existing factors and restrictions and therefore will begin behaving differently which will in turn affect the cost of production (Wright, 2007). The second way a firm that’s into profit maximization can decide its greatest level of output is by way of the marginal revenue -- marginal cost method. This is done by subtracting the marginal cost from the marginal revenue that a product generates. Using marginal cost and marginal revenue as the bases, profit maximization will be obtained at the point when marginal revenue is equal to marginal cost. If the marginal revenue is greater than marginal cost this would be when a profit maximizing firm would need to increase production until marginal revenue is equal to marginal cost.
amortized over the legal life of the purchased patent. added to factory overhead and allocated to production of the purchaser's product. amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product. 3. (TCO C) Intangible assets are reported on the balance sheet (Points : 5) with an accumulated depreciation account.
Recall the CCA rules. If a positive balance remains in an asset class when all assets are sold, this positive balance may be viewed as a terminal loss and must be deducted in full from taxable income, or carried back three years, or carried ahead up to 20 years. Note: 1. You may do this question by hand or using Excel. 2.
Assumptions shown in Exhibit 1(b) for 2012 projections were used to evaluate changes in Accounts Payable purchases, inventory levels, and associated expenses of each option. In addition, loan needs were evaluated as compared to the loan amount available from the bank including restrictions based on Accounts Receivable and Inventory levels and tiered interest rate costs. From the income statement the revenues for Polar Sports have shown an upward trend from 2009 to 2011 Exhibit 1(a). If the company maintains seasonal production, it can expect an approximate net income of $1.147M which is an increase of 28% from 2011. Although the company will be profitable, the company will not benefit from reducing costs of production, operations, or
a bolt needed has increase in price for smaller qty needed to complete total production run. 1. Explain its relationship with total cost. The relationship between marginal cost and total cost is that both are the total cost in producing a unit of goods. C. Define profit.
Home Depot balance sheets report the company´s liabilities, equity, and assets at a precise time. Liabilities and Assets are separated into short- and long-term obligations including cash accounts such as government securities, money market and checking. At specified time, assets must equal liabilities plus owners' equity. Balance sheets clarify and evaluate trends, predominantly in the area of receivables and payables. Home Depot´s balance sheet shows that they reduce their existing liabilities and long-term liabilities.
Thus the company had to clear its financing structure and issue various forms of preferred equity in order to be able to generate demand for its financing. Following the above developments, as its situation started to improve in 1978, MCI used a combination of convertible preferred shares and convertible bonds, a combination of debt and equity, which both included call features to common equity. 2. How much external capital is MCI likely to need over the next several years (FY84 - FY88)? By how much could they reasonably be expected to vary?
a. They are recorded at cost and adjusted for inflation. b. They are recorded at market value for financial reporting because historical cost is arbitrary. c. Accounting principles require that companies report assets on the income statement.
Look at your pricing policy and make changes appropriately. You should compare your own hire prices to those of your competitors, check can you afford a rise in your prices without losing custom? You can use the trading, profit & loss forecast to monitor your spending throughout the year. Keep an eye on your monthly expenses to ensure they do not creep up higher than what you are expecting, as this will affect your overall profit at the end of the year. Use the figures in both forecasts to make appropriate decisions to ensure the survival and success of your