You Were Hired as the CFO of a New Company

question 35

Multiple Choice

You were hired as the CFO of a new company that was founded by three professors at your university.The company plans to manufacture and sell a new product,a cell phone that can be worn like a wrist watch.The issue now is how to finance the company,with equity only or with a mix of debt and equity.The price per phone will be $250.00 regardless of how the firm is financed.The expected fixed and variable operating costs,along with other data,are shown below.How much higher or lower will the firm's expected ROE be if it uses 60% debt rather than only equity,i.e. ,what is ROE_L - ROE_U? $\begin{array}{lrr}&0 \% \text { Debt, U }&60 \% \text { Debt, L }\\\hline\text { Expected unit sales (Q) } & 32,000 & 32,000 \\\text { Price per phone (P) } & \$ 250.00 & \$ 250.00 \\\text { Fixed costs (F) } & \$ 1,000,000 & \$ 1,000,000 \\\text { Variable cost'unit (V) } & \$ 200.00 & \$ 200.00 \\\text { Required investment } & \$ 2,500,000 & \$ 2,500,000 \\\% \text { Debt } & 0.00 \% & 60.00 \% \\\text { Debt, } \$ & \$ 0 & \$ 1,500,000 \\\text { Equity, } \$ & \$ 2,500,000 & \$ 1,000,000 \\\text { Interest rate } & \mathrm{NA} & 10.00 \% \\\text { Tax rate } & 35.00 \% & 35.00 \%\end{array}$
?

• A) 16.52%
• B) 13.65%
• C) 11.33%
• D) 15.70%
• E) 12.56%

Explain the principles behind lung capacity and its measurements.

Understand the effects of environmental factors on respiration.

Describe the mechanisms of carbon dioxide transport in the blood.

Identify and explain common respiratory disorders and conditions.

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Definitions:

Bilingual

Having the ability to speak two languages fluently.

Collaborative

Working together with one or more people in order to achieve a goal, characterized by mutual respect and contribution.

Having Authority

The power or right to give orders, make decisions, and enforce obedience.

Socioeconomic Status

A measure of an individual's or family's economic and social position in relation to others, based on income, education, and occupation.