debt is $1,110,000 (costing 5%). It has 150,000 shares of common stock at $5 per share. The firm is considering reducing its debt by $450,000 by issuing an additional 90,000 shares of common stock. The firm is in the 35 percent tax bracket. Its earnings before interest and taxes will remain the same as the new capital structure will not impact the firm’s operations. Which of the following will be a consequence of the change in Ricalta’s capital structure? • The firm’s earnings before taxes (EBT) will remain unchanged. • The firm’s net income will decrease by $14,625. • The firm’s earnings per share (EPS) will be reduced by $0.66. • The firm’s net income will increase by $10,625. The capital structure of Wilken Corporation is given below. Calculate the weighted average cost of capital (WACC).
Additional details are as follows: • 35% • 65% • 75% • 45% Mirabel Inc. has recently ventured into the home cleaning supplies market with its very own floor cleaner, Flofix, which does not contain any harmful chemicals such as phenol. The company has used aggressive marketing strategies and innovative advertising campaigns to promote the product. The company’s revenue analysis shows that the sales for the product are increasing steadily. However, when the market survey team of the company surveyed a large number of consumers in the target market, the consumers mentioned that they had not switched over to the new brand of floor cleaner. Which of the following, if true, best explains how the sales for the company went up in spite of consumers not purchasing the product? • People prefer to use products that they are familiar with rather than