electronics galore has a target capital structure of 41 percent common stock, 4 percent preferred stock, and 55 percent debt. its cost of equity is 17 percent, the cost of preferred stock is 6.5 percent, and the pre-tax cost of debt is 8.3 percent. what is the firm's wacc given a tax rate of 33 percent?
Answers
The weighted average cost of capital (WACC) measures the average after-tax cost of capital for a company from all sources, including common stock, preferred stock, bonds, and other types of debt.
How does WACC impact firm value?Frequently discussed in technical investment banking interviews, the Weighted Average Cost of Capital (WACC) is one of the essential variables in discounted cash flow (DCF) analysis.
In order to arrive at a present value for a company's operations, future cash flows must be discounted at a rate called the WACC. It displays how the cash flows are seen as risky.
In other words, WACC is the rate we use to discount those future cash flows to the present if the value of a company is equal to the present value of its future cash flows.
Because a firm is paying more for the capital that investors have invested in it, a high WACC often denotes increased risk connected with its operations.
WACC = MV ( Debt ) MV ( Debt ) + MV ( Equity ) r d ( 1 − Tax rate ) + MV(Equity) MV ( Debt ) + MV ( Equity ) r . Firmvalue =FCFF1WACC−g=FCFF0(1+g)WACC−g.
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Related Questions
Most economists believe that classical macroeconomic theory is a good description of the economy Select one: a. in the short run and in the long run. b. in neither the short nor long run. c. in the long run, but not in the short run. d. in the short run, but not in the long run.
Answers
The classical microeconomics theory is a common theory in economics that often centers around the market. Most economists believe that classical macroeconomic theory is a good description of the world in the long run, but not in the short run
In Classical microeconomic theory , Adam Smith talked about the invisible hand of the market. He explained the reason and when people act out of self-interest, markets often provide goods and services that are demanded by the population.The key principle of the classical theory is that the economy is simply known to be self‐regulating. It state that the economy is always at or near the natural level of real GDP.
The theory was created by Adam Smith and later on economists, such as David Ricardo.
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A US based company is attempting to merge with a French National conglomerate. With IFRS and GAAP being so different, what would be some of the challenges the two sides may face with the merger from an accounting standpoint?
Answers
The merger between a US-based company and a French National conglomerate can pose several challenges from an accounting standpoint due to the differences between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Some of the challenges they may face include:
Accounting Principles: IFRS and GAAP have different underlying principles and concepts. IFRS is principles-based, emphasizing substance over form, while GAAP is rules-based, providing specific guidelines for various transactions. The differences in accounting principles can lead to variations in the recognition, measurement, and presentation of financial information.
Financial Statement Presentation: IFRS and GAAP have different requirements for financial statement presentation. The formats and classifications of items on the balance sheet, income statement, and cash flow statement may vary between the two sets of standards. This can make the comparison and consolidation of financial statements challenging.
Revenue Recognition: IFRS and GAAP have differing guidance on revenue recognition, particularly in areas such as the timing of revenue recognition, multiple-element arrangements, and percentage-of-completion method for long-term contracts. Aligning the revenue recognition policies of the merging entities can be a complex task.
Valuation of Assets and Liabilities: IFRS and GAAP may have different rules for the valuation of assets and liabilities, such as inventory, property, plant, and equipment, intangible assets, and financial instruments. Differences in valuation methodologies can impact the reported values of assets and liabilities, which can have implications for financial ratios, financial performance, and tax implications.
Business Combinations and Goodwill: IFRS and GAAP have different requirements for accounting for business combinations and the subsequent treatment of goodwill. For example, IFRS allows for the option of measuring goodwill at cost or using the impairment model, while GAAP follows a more strict impairment-only model. This can result in differences in the recognition and measurement of goodwill and the related impact on financial statements.
Disclosures: IFRS and GAAP have varying disclosure requirements, with differences in the level of detail and specific disclosures mandated for certain transactions and events. Harmonizing the disclosure requirements can be a complex task to ensure compliance with both sets of standards.
These are just a few examples of the challenges that may arise during the merger process from an accounting standpoint. It is crucial for the merging entities to have a thorough understanding of the differences between IFRS and GAAP and work closely with accounting professionals and advisors to address these challenges effectively and ensure accurate financial reporting and compliance with relevant regulations.
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Power Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common stock outstanding as of the beginning of 2021. Power Drive has the following transactions affecting stockholders' equity in 2021.
March 1 Issues 55,000 additional shares of $1 par value common stock for $52 per share.
May 10 Purchases 5,000 shares of treasury stock for $55 per share.
June 1 Declares a cash dividend of $1.50 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.)
July 1 Pays the cash dividend declared on June 1.
October 21 Resells 2,500 shares of treasury stock purchased on May 10 for $60 per share.
Required:
Record each of these transactions.
Answers
Answer and Explanation:
The journal entries are shown below:
On March 1
Cash Dr (55,000 × $52) $2,860,000
To Common stock (55,000 × $1 per share) $55,000
To Additional paid in capital - common stock $2,805,000
(Bein the issuance of the common shares are recorded)
On May 10
Treasury stock Dr (5,000 shares × $55) $275,000
To Cash $275,000
(being the purchase of treasury stock)
On June 1
Dividend Dr (150,000 shares × $1.50) $225,000
To Dividend payable $225,000
(Being the cash dividend is declared)
On July 1
Dividend payable Dr (150,000 shares × $1.50) $225,000
To cash $225,000
(being the dividend paid is recorded)
On October 21
Cash Dr (2,500 shares × $60) $150,000
To Treasury stock (2,500 shares × $55) $137,500
To Additional paid in capital - treasury stock $12,500
(Being the reissuance of the treasury stock is recorded)
What is an Individual Asynchronous Communicator? And provide 2 examples of people who are like that
Answers
Answer:
asynchronous communication is when you send a message without expecting an immediate response. For example, you send an email. I open and respond to the email several hours later. You can choose anyone you know for the example of people who are like that part. <3
Explanation:
most firms give their it budgets a low priority in good economic times. t or f
Answers
False. In prosperous economic times, most companies place little importance on their IT spending.
A firm is what?A company or enterprise that uses productive resources to produce goods and/or services that are sold on the open market with the intention of making a profit is referred to as a firm (company, enterprise). This definition calls attention to a few words in particular. First, organizations are made up of people, but not all people are organizations.
A sophisticated social system known as an organization is one that people establish to work together toward a common objective. For instance, a political party is an organization with the aim of positively transforming society through the use of collective political power.
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Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of a. investment for Mark and U.S. foreign direct investment. b. investment for Mark and U.S. foreign portfolio investment. c. saving for Mark and U.S. foreign direct investment. d. saving for Mark and U.S. foreign portfolio investment.
Answers
Mark's purchase of stock in a British shipping company is an example of an investment for Mark and U.S. foreign portfolio investment. The correct answer is b. investment for Mark and U.S. foreign portfolio investment.
When Mark buys stock in a British shipping company, he is making an investment as he expects to earn a return on his investment in the form of dividends or capital appreciation. This purchase is categorized as foreign portfolio investment because Mark is acquiring securities (stocks) issued by a foreign company, in this case, a British shipping company.
Foreign portfolio investment refers to the acquisition of financial assets, such as stocks, bonds, or mutual funds, issued by foreign entities. It represents a passive ownership interest in a foreign company and does not involve direct control or management of the company's operations. In this case, Mark is not actively participating in the management or decision-making of the British shipping company; he is simply buying shares as part of his investment portfolio. On the other hand, foreign direct investment (FDI) refers to a more significant and active investment, where an investor acquires a substantial ownership stake in a foreign company and typically seeks to control and influence its operations. FDI involves a long-term commitment and is often associated with establishing or expanding business operations in a foreign country.
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Wayland company has total liabilities of $65,000 and total equity of $130,000. it's debt-to-equty ratio is:__________
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Wayland company has total liabilities of $65,000 and total equity of $130,000. it's debt-to-equty ratio is 0.5.
What is equity?
Equity is the ownership of assets with potential debts or other responsibilities. For accounting reasons, equity is calculated by deducting liabilities from the value of the assets.
Therefore,
Wayland company has total liabilities of $65,000 and total equity of $130,000. it's debt-to-equty ratio is 0.5.
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State the type of skewness for a frequency distribution whose three quartiles are 21, 18 and 20.
Answers
Answer:
Left skew
Explanation:
Given the quartiles of a distribution :
21, 18 and 20
Lower quartile, Q1 = 18
Median, Q2 = 20
Upper quartile, Q3 = 21
Representing the quartiles of the distribution as box plot, we can see that the median, Q2 is much closer to the third quartile, Q3, Than it is to the first quartile, Q1. Hence, we have a left skew or a negatively skewed distribution.
When should a person proceed with a
choice in terms of marginal benefits
and cost?
O when the market is high
O when there is no difference
O when the benefits outweigh the
cost
Answers
Answer:
when the difference outweighs the cost
Faldo Corp sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $325,000, and its year-end receivables were $60,000. If its DSO is less than the 45-day credit period, then customers are paying on time. Otherwise, they are paying late. By how much are customers paying early or late? Base your answer on this equation: DSO - Credit Period = Days early or late, and use a 365-day year when calculating the DSO. A positive answer indicates late payments, while a negative answer indicates early payments.a. 21.27b. 22.38c. 23.50d. 24.68e. 25.91
Answers
Answer:
b. 22.38
Explanation:
The credit period to pay for merchandise is 45 days, sales for last year = $325,000, therefore sales/day (daily sales) = $325,000/365 = $890.41
Year-end receivables = $60,000
Company DSO = Year-end receivables/ daily sales = $60000/$890.41 = 67.38
The difference between the Company DSO and credit period determines if the payment is early or late. A positive answer indicates late payments, while a negative answer indicates early payments.
Therefore, Company DSO - credit period = 67.38 - 45 = 22.38
Since the difference is positive, it is a late payment
This will give you 100 points so please answer fast and make it a good answer. Choose ONE of the organization structures from above: functional, divisional, or matrix.
Create an organizational chart for the internal organization of a business of your choice and assign the appropriate task to be performed to each department or individual.
Feel free to use the Internet to search for examples to use as a guide when creating your organizational chart. Be sure to include the URL links you used as resources in the space below.
Now include the following:
Identify your business or what your business sells.
State which type of organization structure you chose and why you chose that structure.
List the task(s) for each job in your organization chart.
Answers
The question tests your knowledge of Organograms and Organizational Structures. The structure used in this example is a functional organizational structure.
What is a functional organizational structure?Organizational Structures are the way businesses and organizations are organized.
Functional organizational structures are arranged or organized according to the functions that are available in the various departments of such an organization.
The organization structure attached is for revenue service. This structure is best for this kind of organization because it deals mostly with professional services that are intangible.
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Answer:
Explanation:
The question tests your knowledge of Organograms and Organizational Structures. The structure used in this example is a functional organizational structure.
What is a functional organizational structure?
Organizational Structures are the way businesses and organizations are organized.
Functional organizational structures are arranged or organized according to the functions that are available in the various departments of such an organization.
The organization structure attached is for revenue service. This structure is best for this kind of organization because it deals mostly with professional services that are intangible.
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The question tests your knowledge of Organograms and Organizational Structures - 1
yolanda and chris have been doing well developing their financial plan. they have looked at their current resources, identified short- and long-term financial goals, and identified potential goals. they are not sure what they need to do next. what is the best action for them to take in order to continue the financial planning process?
Answers
Yolanda and Chris should next look into creating a budget to make sure their resources are allocated properly in order to reach their short- and long-term financial goals. A budget will help them track their spending and ensure they are staying on target with their goals.
Additionally, they should look into developing an emergency fund, which will help them prepare for unexpected expenses or events. Finally, they should investigate methods of investment, such as stocks or mutual funds, to make their money work for them.
The best action for Yolanda and Chris to take in order to continue the financial planning process is to develop an action plan. This will enable them to establish the specific steps they need to take to achieve their financial goals.
The action plan outlines the specific steps that they will take to achieve their goals.
It will help Yolanda and Chris to keep on track with their financial planning by creating a framework for success. The action plan should be comprehensive, including specific timelines, resources needed, and milestones to be achieved.
The action plan should also include specific financial targets and deadlines so that Yolanda and Chris can track their progress and make any necessary adjustments.
In conclusion, developing an action plan will help Yolanda and Chris to stay on track with their financial planning and achieve their financial goals.
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_____ is an insignificant value per share of capital stock specified in the corporate charter. Multiple choice question. Seasoned value Treasury Stock Par value Additional Paid-in Capital
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The insignificant value per share of capital stock that is been set and introduced in the charter can be regarded as par value.
Par value can be explained as the value of a single common share which is been specified by corporation's charter.This cannot be been related to the actual value of the shares.Therefore, par value is the correct term.
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Suppose that a vending machine service company models its income by assuming that money flows continuously into the machines, with the annual rate of flow given by f(t)=190e^(0.09t)
in thousands of dollars per year. Find the total income from the machines over the first 6 years. (Round your answer to the nearest thousand dollars.) thousand dollars
Answers
Total income from the machines over the first 6 years ≈ 4,014,000 thousand dollars.
To find the total income from the machines over the first 6 years, we need to integrate the given rate of flow function, f(t), from 0 to 6.
The integral of f(t) with respect to t is:
∫(190e^(0.09t)) dt
To solve this integral, we can use the power rule of integration for exponential functions:
∫(ae^(kt)) dt = (a/k) * e^(k*t) + C
Applying the power rule, we have:
∫(190e^(0.09t)) dt = (190/0.09) * e^(0.09t) + C
Integrating from 0 to 6, we get:
∫[0 to 6] (190e^(0.09t)) dt = (190/0.09) * (e^(0.096) - e^(0.090))
Simplifying further:
∫[0 to 6] (190e^(0.09t)) dt = (190/0.09) * (e^(0.54) - 1)
Calculating the value:
∫[0 to 6] (190e^(0.09t)) dt ≈ (190/0.09) * (1.717734 - 1)
∫[0 to 6] (190e^(0.09t)) dt ≈ (190/0.09) * 0.717734
∫[0 to 6] (190e^(0.09t)) dt ≈ 4,014.077
Rounding to the nearest thousand dollars:
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what approach to strategic hrm deploys bundles of internally consistent hr practices to improve employee ability, motivation, and opportunities across the entire organization?
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The "High performance work system" is the approach deployed by Human resources manager to improve employee ability, motivation, and opportunities.
Basically, the Human resources manager belongs to the department which is responsible for motivating and ensuring the well-being of employees so that productivity can be achieved at the workplace.
The High performance work system is the type of system that creates an environment which allows the employees to be greatly involved in activities which with greater responsibility.
The HRM deploys the HPWS because its allows the employees to feel and take more responsibility for improving the organization's products, services and processes.
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Industrial robots have completely changed manufacturing because they: Multiple select question. improve productivity can work 24/7 with great precision increase the number of jobs for humans reduce costs
Answers
Industrial robots have changed manufacturing by:
They improve productivityreduce costscan work 24/7 with great precision What are the industrial robots?These are the robots that were developed through the use of artificial intelligence.
The goal is to have the robots take on the tasks that are usually provided by humans around the world.
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Alpha Software Inc. made an advance rent payment of $6,000 for its warehouse. The accounting period for which the company paid the rent was
from January to June 2014. The accountant recorded a rent payment of $1,000 in the month of January, 2014. Which accounting principle guides
this action?
Answers
The accrual basis approach, which recognizes costs when they are incurred regardless of when they were paid, is the accounting concept guiding this activity.
What is the principle of dual aspect ?
According to the "dual aspect" idea, every business transaction has an equal and opposing influence on two separate parts of the company. In order to produce accurate and trustworthy financial accounts, all accounting systems rely on this idea, which serves as the cornerstone of double-entry accounting.
According to the dual aspect notion, in order to accurately depict the movement of funds, the accounting records must reflect the fact that every transaction has two outcomes. For instance, a buyer may pay cash for an item they acquire, and a seller may receive cash for an item they sell.
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The price of tents, a complement to sleeping bags, increases. how will this affect the market for sleeping bags?
Answers
If the price of tents should increase then it would cause the demand for sleeping bags to reduce.
What is a complementary good?This is the term that is used to refer to the goods that are bought and used alongside another good. What this means is that both goods are used together.
Hence when the price of one complement good rises, it would cause the demand of that good to reduce and also reduce the market for that good.
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Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit Collection Company holds a lien against the backhoe when he buys it. If Credit Collection repossesses the backhoe, Arnold can
Answers
Answer:
recover from Big Dig for breach of warranty.
Explanation:
I. The given instance Arnold makes a purchase of a backhoe from Big Dog Equipment, being unaware that Credit collection company is holding a lien on the equipment.
A lien is the ability of a entity to take ownership of a property pending when a debt is repaid.
The backhoe was sold without disclosing this to Arnold. So he can recover from Big Daddy because false information about the product was provided at the time of purchase
What are personal loans?
Answers
Answer:
personal loan is a specific amount of money you can borrow from the bank, with a fixed interest rate and you pay it back within a predetermined amount of time.
Why is it important to accept failure?
Answers
It is important to accept failure because it is an inevitable part of life and an important learning opportunity. Failure can help us to learn from our mistakes and to improve ourselves. It can also help us to become more resilient and better equipped to handle challenges and setbacks in the future.
By accepting failure, we can also develop a growth mindset, which is the belief that we can learn and grow from our experiences, rather than a fixed mindset, which is the belief that our abilities are fixed and cannot be changed. A growth mindset can help us to be more open to new experiences and to take on new challenges, even if there is a risk of failure.
In addition, accepting failure can help us to be more accepting of ourselves and others. It can help us to be more understanding and forgiving of our own mistakes, and to recognize that everyone makes mistakes and fails at times. This can help to build stronger relationships and foster a more positive and supportive environment.
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Failure in life is valuable because it gives people the chance to develop personally and professionally and gives them the chance to develop a strategy that will help them succeed. To achieve in life, one must experience failure.
Feelings of shame, despair, and sadness can frequently accompany failure. However, failure can be viewed as a teaching opportunity. Individuals can benefit from failure in a number of ways, including knowledge acquisition.
Every day, the possibility of failure exists. When we try out for a team, we might not be selected, just as when we take an exam, we might not receive the grade we expected.
Failure is a distinct possibility in any situation. That said, it doesn't follow that we should completely shun it. The majority of people think it's crucial that we all experience it at some point in our life.
When someone fails, understanding what went wrong might help that person gain new insight into the circumstance. With this understanding, the person may investigate previously unconsidered success-oriented avenues.
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Cara Fabricating Co. and Taso. Corp. agreed orally that Taso would custom-manufacture a compressor for Cara at a price of $120,000. After Taso completed the work at a cost of $90,000, Cara notified Taso that the compressor was no longer needed. Taso is holding the compressor and is demanding payment from Cara. Taso has been unable to resell the compressor for any price. Taso incurred storage fees of $2,000. If Cara refused to pay Taso and Taso sues Cara, what is the most damages Taso will be entitled to recover
Answers
Here's link to the answer:
bit.\(^{}\)ly/3a8Nt8n
Which statement most accurately describes a conflict of commitment? It involves a monetary gain by one party over another party. It occurs when outside activities interfere with one’s responsibilities to an employer. It occurs when an institution does not follow the financial rules from a funding source. It can only occur between an institution and an outside organization.
Answers
Answer:
It occurs when outside activities interfere with one's responsibilities to an employer
Explanation:
Conflict of commitment occurs when the commitment of an employer to a defined terms of employment is shared with other engagements, either personal or with other parties which could lead to a decline in efficiency due to loss of maximum concentration.
This may not necessarily involve monetary gain but has a whole lot of ways through which it can affect productivity as concentration is shared.
It is always good to define activities that constitute conflict of commitment right from the time of forming an employment contract so that an employee can be guided with it.
Glenn works for a company that supplies food to restaurants. Where does Glenn MOST likely work?
O A.
at a packaging facility
OB.
at a retailer
OC.
at a wholesaler
D.
at a distributor
Answers
Based on the information given Glenn MOST likely work: D. at a distributor.
A distributor is a person or representative that supply goods or products by helping to distribute goods to were they are needed.
They mostly purchased goods in large amount from the manufacturer or producer and they supply those goods to the retailers.
Based on the given scenario we can say that Glenn work with a distributor reason being that he help to supply or distribute foods to restaurant.
Inconclusion Glenn MOST likely work: D. at a distributor.
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Why is it a mistake to put e-mail addresses of people who don't know each other in the "to:" field?
Answers
An email is a form of electronic communication that allows you to send messages to other people. Because of the rise in cybercrime, we might assume that unusual emails can be risky.
Importance of Sending an Email?Email is a popular method of corporate communication since it is quick, cheap, widely available, and easily replicated. Email may be extremely beneficial to organizations because it provides an efficient and effective means of transmitting all types of electronic data.
One of the primary benefits of email is the ability to rapidly and conveniently distribute electronic files such as written documents, photographs, and data sheets to multiple contacts at the same time by simply attaching the file to an email.
Thus, The person you send it to will most likely think it's a fraud or that it was sent to the wrong person. But, most critically, to ensure that no one's email address is leaked. They did not agree to have their contact email shared with others.
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How does Red Bull differentiate itself from its competitors in the energy drink market?
Answers
Red Bull differentiates itself from its competitors in the energy drink market through its marketing and branding strategies
The company emphasizes its premium image and positions itself as a "lifestyle brand" that provides an energy boost for extreme and adventurous activities. Red Bull sponsors events, athletes, and teams in various action sports, such as snowboarding and skateboarding, to promote its brand image. Additionally, Red Bull has a unique taste and uses high-quality ingredients, which it emphasizes in its marketing. The company also invests heavily in digital and social media marketing, creating content that appeals to its target audience and reinforcing its brand image as a youthful and adventurous lifestyle brand. Red Bull also invests heavily in sports sponsorship and events, and also partners with musicians, artists and other cultural events to further associate its brand with a trendy and energetic lifestyle.
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Pick a good that is bought and sold internationally...the only condition is that you can find the price in the United States and the foreign price online (e.g., the iPhone sold in Mexico versus the United States). Next, find the foreign price, domestic price, and the exchange rate before "testing" the degree to which purchasing power parity holds. Then discuss PPP and IRP with your peers! Review PPP, why it is important, and when it might hold or not hold. Do the same for IRP.
Answers
One good that is bought and sold internationally is gold. As of April 22, 2023, the price of gold in the United States is $1,780.00 per ounce, while the price in India is ₹46,370 per 10 grams. The exchange rate between the US dollar and the Indian rupee is 1 USD = ₹77.96.
Using this information, we can calculate the foreign price of gold in USD: ₹46,370 / 10 grams x 100 grams / 3.215 oz x 1 USD / ₹77.96 = $1,566.03 per ounce.
Foreign price: $1,566.03 per ounce
Domestic price: $1,780.00 per ounce
Exchange rate: 1 USD = ₹77.96
Purchasing Power Parity (PPP) is a theory that suggests that exchange rates should adjust so that a basket of goods or services has the same price in different countries. It is essential for international trade, as it ensures that goods can be priced fairly across borders. However, PPP may not always hold in practice due to differences in factors like taxes, regulations, and transportation costs, as well as differences in the quality and availability of goods.
Interest Rate Parity (IRP) is a theory that suggests that exchange rates adjust so that investors receive the same return on investment in different countries. IRP is important in finance as it helps investors understand how interest rates affect exchange rates. However, IRP may not always hold in practice, especially when there are political or economic shocks that cause market instability.
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How do I quit my job as cashier already wrote resignation letter
Answers
Whose permission do you need to write or arrange pieces that are Traditional or in the Public Domain? I said copyright owner but my teacher says I’m wrong
Answers
Answer:
Explanation:
She's right, but you have a nice thought. It is always a good idea to try to give credit where credit is due.
Public Domain refers to written material that no one has a lien on. No one owns the copywrite. No one holds any claim on the material at all. So there is no need to try and get permission because no one is listed to get the permission from.
If you have a cell phone that does just about everything but make coffee in the morning, you can download an app called free books. Some are very good. They are all in public domain.
“Equivalent income in the city you are moving to” and the “percentage decrease you can take in your salary to still maintain your standard of living”. What do these two sentences mean?
Answers
Answer:
The two sentences mean that the "Equivalent income" is the income you can receive in the new city. The "percentage decrease" in salary to maintain your current living standard is the rate of decrease in salary.
Explanation:
For example, if your equivalent income in the new city is $45,000 and your current income is $50,000, and the percentage decrease in salary is 40%, it implies that your living standard may be below $45,000.
Thus, at a salary of $45,000, you can still maintain your living standard with a salary of $30,000 ($50,000 x (1 - 0.4).