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You have chosen to produce a Q of 20, with a price of 425

OPERATING COST: C = 3800 + 100Q + 5Q²

TOTAL ASSET: TA= 1000 + 50 Q

FIRM IS FINANCED WITH 30% DEBT

EQUITY INVESTOR REQUIRED RATE OF RETURN: Ke=20%

COST OF DEBT: Kd = 10%

TAX RATE: 25%

Here's the formulas:

R*T=EBIT/Sales*Sales/TA*(1-t)

R = R*T+(R*T-Kd^t)*(L/1-L)

Profitability Premium: =R-ke

Economic Profit p: E-ke(NW)

L=D/TA

a. At this P and Q combination, what are the values for it, R, and e? b. = C. Suppose you are now regulated, and regulators force you to produce Q = 20, with P = 375. With everything else still the same, what now are the values for r, R, and O? You want to remain in the industry with the required Q of 20 and P of 375. You decide to increase L to give a value for at that will enable you to stay in the industry. Assuming that ke and kd stay the same as in part a, what new value for L is necessary? a. At this P and Q combination, what are the values for it, R, and e? b. = C. Suppose you are now regulated, and regulators force you to produce Q = 20, with P = 375. With everything else still the same, what now are the values for r, R, and O? You want to remain in the industry with the required Q of 20 and P of 375. You decide to increase L to give a value for at that will enable you to stay in the industry. Assuming that ke and kd stay the same as in part a, what new value for L is necessary

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