Suppose That Banana Computers Has $1,000 in Revenue This Year

question 86

Multiple Choice

Suppose that Banana Computers has $1,000 in revenue this year, along with COGS of $400 and SG&A of $100. The required rate of return on its equity is 14%, and the risk-free rate is 5%. Assume that the COGS only include the marginal costs of selling a computer. Banana is considering adding $700 worth of debt with a coupon rate of 5% and an YTM of 7.9% to its capital structure. What percent of the firm's costs are fixed, and what percent of costs are variable with the added debt? (Round the percentage answer to two decimal places.)

• A) 27.9% and 72.1%
• B) 72.1% and 27.9%
• C) 25.23 and 74.77%
• D) 74.77% and 25.23%

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Definitions:

Photosynthesis

The process by which green plants and some other organisms use sunlight to synthesize foods with carbon dioxide and water, producing oxygen as a byproduct.

Reactants

Substances initially present in a chemical reaction that are consumed during the reaction to make products.

Photosynthesis Products

The outputs of the photosynthesis process, primarily oxygen and glucose, produced by green plants, algae, and cyanobacteria.

Photosynthetic Organisms

Life forms that convert light energy into chemical energy through the process of photosynthesis, typically including plants, algae, and certain bacteria.