1. a. b. C. Your firm's operating costs are given by C = 3800 + 100Q+5Q2....

 

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1. a. b. C. Your firm's operating costs are given by C = 3800 + 100Q+5Q2. The firm's total assets are given by TA = 1000 + 50 Q, and the firm is financed 30% with debt. The equity investors require a 20% rate of return, the cost of debt is 10%, and the tax rate is 25%. You have chosen to produce a Q of 20, with a price of 425. π = E-ke(NW) 0 = R-ke Ke cost of equity. Kd cost of debt. - R-Return on Equity. E = Net Income = earnings after taxes = EAT NW=net worth = stockholders equity = SE R = return on equity =E/NW = E/SE L Total Debt Ratio =D/TA D total debt total liabilities, all debt TA D+ NW = D + SE At this P and Q combination, what are the values for л, R, and 0? Suppose you are now regulated, and regulators force you to produce Q=20, with P = 375. With everything else still the same, what now are the values for л, R, and 0? You want to remain in the industry with the required Q of 20 and P of 375. You decide to increase L to give a value for л that will enable you to stay in the industry. Assuming that ke and kd stay the same as in part a, what new value for L is necessary? 1. a. b. C. Your firm's operating costs are given by C = 3800 + 100Q+5Q2. The firm's total assets are given by TA = 1000 + 50 Q, and the firm is financed 30% with debt. The equity investors require a 20% rate of return, the cost of debt is 10%, and the tax rate is 25%. You have chosen to produce a Q of 20, with a price of 425. π = E-ke(NW) 0 = R-ke Ke cost of equity. Kd cost of debt. - R-Return on Equity. E = Net Income = earnings after taxes = EAT NW=net worth = stockholders equity = SE R = return on equity =E/NW = E/SE L Total Debt Ratio =D/TA D total debt total liabilities, all debt TA D+ NW = D + SE At this P and Q combination, what are the values for л, R, and 0? Suppose you are now regulated, and regulators force you to produce Q=20, with P = 375. With everything else still the same, what now are the values for л, R, and 0? You want to remain in the industry with the required Q of 20 and P of 375. You decide to increase L to give a value for л that will enable you to stay in the industry. Assuming that ke and kd stay the same as in part a, what new value for L is necessary?

Answer rating: 100% (QA)

a First we need to calculate the total revenue TR PQ 42520 8500 Next we can calculate the total cost... View the full answer