MBA800X27

# MBA800X27 - \$14,036 X 9 = \$1,263 normal earnings Net income = \$22,570-\$20,000 = \$2,570 \$2,570 \$1,263 = \$1,306 abnormal earnings \$1,306/\$14,036 =

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A. Value of asset: .4(\$6,000) + .6(\$10,000) = \$8,400 (0.42+0.2)(\$6,000) + (0.18+0.2)(\$10,000) = \$7,520 (\$8,400/1.09) + (\$7,520/1.09^2) = \$14,036 Cash \$5,964 Equity \$20,000 Asset 14,036 \$20,000 \$20,000 B. Cash is increased by \$10,000. Asset value is: 0.7(\$6,000) + 0.3(\$10,000) = \$7,200 \$7,200/1.09 = \$6,606 Cash \$15,964 Equity \$22,570 Asset 6,606 \$22,570 \$22,570 C. Investment began at \$14,036. Given an 9% rate would be:
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Unformatted text preview: \$14,036 X 9% = \$1,263 normal earnings Net income = \$22,570-\$20,000 = \$2,570 \$2,570 - \$1,263 = \$1,306 abnormal earnings \$1,306/\$14,036 = 9.3% D. Cash \$15,964 Equity \$22,982 Asset 7,018 \$22,982 \$22,982 E. \$22,570 (from B) /\$22,982 (from D) = 0.982or 0.982 to 1 or 98.2%, but not 98.2 F. \$2,570 economic earnings \$2,570/\$14,036 = 18.31% G. \$22,982 (from D) - \$20,000 = \$2,982 \$2,982/\$14,036 = 21.25%...
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## This note was uploaded on 07/28/2011 for the course MBA 800 taught by Professor Wallin during the Summer '11 term at Ohio State.

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