If Wild Widgets, Inc., were an all-equity company, it would have a beta of .95. The company has a target debt-equity ratio of .40. The expected return on the market portfolio is 11 percent and Treasury bills currently yield 3.5 percent. The company has one bond issue outstanding that matures in 15 years and has a coupon rate of 6.5 percent. The bond currently sells for $1,080. The corporate tax rate is 21 percent.Required: a. What is the company's cost of debt? b. What is the company's cost of equity? c. What is the company's weighted average cost of capital?
a. The company's cost of debt
Cost of Debt = Total after tax cost
b. The company's cost of equity?
Cost of equity = Return from risk free + Beta x Market Premium
c. The company's weighted average cost of capital
weighted average cost of capital = Weighted Cost of Debt + Weighted Cost of Equity
Lumeris Inc., an automobile manufacturer, has an inflexible work schedule and requires its workers to work nine hours a day and six days a week. Its laborers do not have adequate skills to perform their job efficiently. The inflexible work schedule and inadequate labor skills are examples of _____.a. physical constraints b. nonphysical constraints c. bottleneck activities d. work order
The correct answer is letter "B": nonphysical constraints.
According to the Theory of Constraints (TOC) a constraint is a limiting factor that does not enable companies to perform their work at their maximum capacity for their goals' achievement. In the same sense, nonphysical constraints are not material factors negatively influencing employees' actions. Wages cuts, reduction of benefits, unclear lines of command are examples of that kind of constraint.
Supply has the potential to contribute to: ___________a. Cost management, profitability, return on assets, competitive position and corporate social policy. b. Cost management, profitability, return on assets and competitive position. c. Cost management, profitability and return on assets. d. Cost management and profitability. e. Cost management.
Answer: Cost management, profitability, return on assets, competitive position and corporate social policy
Supply has the potential to contribute to cost management, profitability, return on assets, competitive position and corporate social policy.
Supply is defined as the amount of goods or services that a supplier is willing to offer for sale at a particular price and at a certain period. The amount of goods offered can determine the revenue generated and hence the profit made.
Robert House believed that a leader cannot move back and forth among the four leadership styles: directive, supportive, achievement-oriented, and participative. a) True b) False
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What insight does ROI give into investment performance? Is it acceptable to lose profit on one product, if that product is vital to the sale of an extremely profitable product? Why?
Return on investment (ROI) can be defined as a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of investments.
The ability to calculate return on investment is particularly valuable for any business regardless of its size or industry. by calculating ROI, an individual can understand how well their business is doing and which areas needs improvement.
Every business decision requires knowldge of ROI, so as to optimize profitability. Yes it is acceptable to loose profit of one product for the sale of a profitable product because the gain that would be derived by selling an extremely profitable products is better for the company that the gain one product will derive. Afterall, every company wants to increase profitability.
Lanning Company sells 160,000 units at $45 per unit. Variable costs are $27 per unit, and fixed costs are $975,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio % b. Unit contribution margin $ per unit c. Income from operations
a. Contribution margin ratio = Contribution per unit/selling price
= 0.4 = 40%
b. Contribution per unit = Selling price - Variable cost per unit
= $45 - $27
c. Income from operations $
Total contribution ($18 x 160,000 units) 2,880,000
Less: Fixed cost 975,000
Income from operations 1,905,000
Contribution margin ratio is the ratio of contribution per unit to selling price
Contribution per unit is the excess of selling price over variable cost per unit
Income from operation is the excess of total contribution over fixed cost
Baker's product manager continues to perform well in the market. However, a competing product is coming on strong and is looking to take over as the market share leader in the segment. Without sacrificing contribution margin, what can the Baker product manager do in order to improve upon the buying criteria, and thus potentially increase demand
Question options :
Increase MTBF by 2000
Reposition Cake to make it even smaller and higher performing
Increase the promotion budget to gain greater awareness
Lower the selling price since it is the second most important buying criteria
Increase the promotion budget to gain greater awareness
In this case, some managers might consider reducing price and may be affecting contribution margin in this way(because selling price/profit is reduced and price- variable cost =contribution margin). While price reduction might be a good strategy to compete in the market, it might not be the best option here. in order to increase demand in a case such as this, the manager should consider increasing product awareness so as to reach more potential buyers and increase market share compared to competitors.