1. According to the information for two firms (levered and unlevered firms) given below, compute the value of the levered firm including the values of the tax-shield benefits of the
debt and bankruptcy-agency costs. Assuming zero growth and 100% dividend payout,
permanent debt, so treated as a perpetuity. (30p)
NOTE: PLEASE SHOW HOW YOU COMPUTE EACH OF THE ITEMS.
Debt amount for levered firm
:
$50.000
NOI for each firm
:
$40.000
Interest rate for the debt
:
10%
Stock market return
12%
Tax rate for each firm
20%
5%
Treasury bill rate
Present value for bankruptcy-agency cost
Beta (B) coefficient for unlevered firm
$38.000
:
0.9

Vortex company operates a retail store with two departments. information about those departments follows. department a department b sales $ 800,000 $ 450,000 cost of goods sold 497,000 291,000 direct expenses salaries 125,000 88,000 insurance 20,000 10,000 utilities 24,000 14,000 depreciation 21,000 12,000 maintenance 7,000 5,000 the company also incurred the following indirect costs. salaries $36,000 insurance 6,000 depreciation 15,000 office expenses 50,000 indirect costs are allocated as follows: salaries on the basis of sales; insurance and depreciation on the basis of square footage; and office expenses on the basis of number of employees. additional information about the departments follows. department square footage number of employees a 28,000 75 b 12,000 50 required: 1. determine the departmental contribution to overhead and the departmental net income for department a and department b.