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Elementary,Middle School,High School,College,University,PHD
Teaching Since: | Apr 2017 |
Last Sign in: | 325 Weeks Ago, 6 Days Ago |
Questions Answered: | 3232 |
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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company’s profits are driven by the amount of work Tom does. If he works 40 hours each week, the company’s EBIT will be $500,000 per year; if he works a 50-hour week, the company’s EBIT will be $600,000 per year. The company is currently worth $3 million. The company needs a cash infusion of $2 million, and it can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? b. Under which form of financing is Tom likely to work harder? c. What specific new costs will occur with each form of financing?
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