Your Girlfriend Plans to Start a New Company to Make

question 43

Multiple Choice

Your girlfriend plans to start a new company to make a new type of cat litter.Her father will finance the operation,but she will have to pay him back.You are helping her,and the issue now is how to finance the company,with equity only or with a mix of debt and equity.The price per unit will be $10.00 regardless of how the firm is financed.The expected fixed and variable operating costs,along with other information,are shown below.How much higher or lower will the firm's expected EPS be if it uses some debt rather than only equity,i.e. ,what is EPS_L - EPS_U? Do not round your intermediate calculations. $\begin{array}{lrr}&0 \% \text { Debt, U }&60 \% \text { Debt, L }\\\hline\text { Expected unit sales } & 290,000 & 290,000 \\\text { Price per unit } & \$ 10.00 & \$ 10.00 \\\text { Fixed costs } & \$ 1,000,000 & \$ 1,000,000 \\\text { Variable cost/unit } & \$ 3.50 & \$ 3.50 \\\text { Required investment } & \$ 2,500,000 & \$ 2,500,000 \\\text { Shares issued at } \$ 10 / \text { share } & 250,000 & 100,000 \\\% \text { Debt } & 0.00 \% & 60.00 \% \\\text { Debt, } \$ & \$ 0 & \$ 1,500,000 \\\text { Equity, } \$ & \$ 2,500,000 & \$ 1,000,000 \\\text { Interest rate } & \mathrm{NA} & 10.00 \% \\\text { Tax rate } & 35.00 \% & 35.00 \%\end{array}$
?

• A) $02.48
• B) $02.35
• C) $03.10
• D) $02.85
• E) $02.60

Recognize the importance of having positive values for logarithmic transformations.

Describe relationships between variables using scatterplots, including identifying linear, quadratic, and cubic relationships.

Understand the concept of "direction" in scatterplots as it relates to positive and negative associations.

Identify outliers within data and understand their impact on scatterplots and data analysis.

---

Definitions:

Vulva

The external female genital organs, including the labia majora, labia minora, clitoris, and the opening of the vagina.

Labia Majora

The larger outer folds of skin that enclose and protect the other external genital organs in females.

Scrotum

The pouch of skin and muscle that houses the testicles in males, regulating temperature for optimal sperm production.