Theory and Taxes DataCore Inc. currently has an all-equity capital structure. However, the firm is considering a recapitalization that would structure the firm with 25% debt and 75% equity by issuing an appropriate amount of debt and repurchasing an equal amount of common stock; the debt is expected to have a 5% coupon rate. The firm expects the following scenarios over the next year for EBIT Outlook Probability EBIt
Good 35% 800000
Average 40% 525000
Poor 25% 75000
The firm currently has 200,000 shares of common stock outstanding at $43 per share. The firm is in a 0% tax bracket.
1. Determine the expected earnings before interest and taxes, net income, and earnings per share (a) if the firm maintains its current unlevered capital structure and (b) if it recapitalizes at 25% debt and uses the proceeds to repurchase conm
2. Following the assumptions behind M&M's Proposition I, calculate the stockholders' required rate of return of the firm in an unlevered versus a levered state. Calculate the value of the levered firm, separating it into debt and equity components. Also, calculate the weighted average cost of capital (WACC) for the firm in a levered versus an unlevered state. 3. Assuming the firm is in a 35% corporate tax bracket, determine the value of the unlevered firm versus the value of the levered firm.

Afirm that makes electronic circuits has been ordering a certain raw material 250 ounces at a time. the firm estimates that carrying cost is i = 30% per year, and that ordering cost is about $20 per order. the current price of the ingredient is $200 per ounce. the assumptions of the basic eoq model are thought to apply. for what value of annual demand is their action optimal?

Job a3b was ordered by a customer on september 25. during the month of september, jaycee corporation requisitioned $2,400 of direct materials and used $3,900 of direct labor. the job was not finished by the end of the month, but needed an additional $2,900 of direct materials in october and additional direct labor of $6,400 to finish the job. the company applies overhead at the end of each month at a rate of 100% of the direct labor cost. what is the amount of job costs added to work in process inventory during october?

5. profit maximization and shutting down in the short run suppose that the market for polos is a competitive market. the following graph shows the daily cost curves of a firm operating in this market. 0 2 4 6 8 10 12 14 16 18 20 50 45 40 35 30 25 20 15 10 5 0 price (dollars per polo) quantity (thousands of polos) mc atc avc for each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the previous graph to identify its total variable cost. assume that if the firm is indifferent between producing and shutting down, it will produce. (hint: you can select the purple points [diamond symbols] on the previous graph to see precise information on average variable cost.) price quantity total revenue fixed cost variable cost profit (dollars per polo) (polos) (dollars) (dollars) (dollars) (dollars) 12.50 135,000 27.50 135,000 45.00 135,000 if the firm shuts down, it must incur its fixed costs (fc) in the short run. in this case, the firm's fixed cost is $135,000 per day. in other words, if it shuts down, the firm would suffer losses of $135,000 per day until its fixed costs end (such as the expiration of a building lease). this firm's shutdown price—that is, the price below which it is optimal for the firm to shut down—is per polo.