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

question 22

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. Suppose, revenues fall by $300, what is the percent change in net income with and without the debt? Assume that the total variable production costs remain the same. (Round the answer to one decimal places.)

• A) 64.5% and 60%
• B) 60.0% and 64.5%
• C) 59.2% and 40.8%
• D) 40.8% and 59.2%

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Definitions:

Post-training Behaviour

The actions or conduct exhibited by employees after participating in training programs, reflecting the effectiveness of the training.

Decision-based Evaluation Model

A framework for analyzing and making judgments about programs, systems, or policies based on criteria related to decision-making processes and outcomes.

Evaluation

The systematic assessment of the value, importance, or effectiveness of something, often for the purpose of making improvements.

Descriptive Training Evaluation Models

Frameworks used to systematically assess and describe the effectiveness and outcomes of training programs.