Acort Industries owns assets that will have a 75% probability of having a market value of $52 million in one year. There is a 25% chance that the assets will be worth only $22 million. The current risk-free rate is 5%, and Acort's assets have a cost of capital of 10%. a) If Acort is unlevered, what is the current market value of its equity? b) Suppose instead that Acort has debt with a face value of $18 million due in one year. According to MM (i. e. perfect market), what is the value of Acort's equity in this case? c) What is the expected return of Acort's equity without leverage? What is the expected return of Acort's equity with leverage? d) What is the lowest possible realized return of Acort's equity with and without leverage?

Presented below is a list of possible transactions. analyze the effect of the 18 transactions on the financial statement categories indicated. transactions assets liabilities owners’ equity net income 1. purchased inventory for $80,000 on account (assume perpetual system is used). 2. issued an $80,000 note payable in payment on account (see item 1 above). 3. recorded accrued interest on the note from item 2 above. 4. borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note. 5. recognized 4 months’ interest expense on the note from item 4 above. 6. recorded cash sales of $75,260, which includes 6% sales tax. 7. recorded wage expense of $35,000. the cash paid was $25,000; the difference was due to various amounts withheld. 8. recorded employer’s payroll taxes. 9. accrued accumulated vacation pay. 10. recorded an asset retirement obligation. 11. recorded bonuses due to employees. 12. recorded a contingent loss on a lawsuit that the company will probably lose. 13. accrued warranty expense (assume expense warranty approach). 14. paid warranty costs that were accrued in item 13 above. 15. recorded sales of product and related service-type warranties. 16. paid warranty costs under contracts from item 15 above. 17. recognized warranty revenue (see item 15 above). 18. recorded estimated liability for premium claims outstanding.

On the first day of the fiscal year, a company issues an $7,500,000, 8%, five-year bond that pays semiannual interest of $300,000 ($7,500,000 × 8% × ½), receiving cash of $7,740,000. journalize the first interest payment and the amortization of the related bond premium. round to the nearest dollar. if an amount box does not require an entry, leave it blank.

What two things do you consider when evaluating the time value of money