Therefore, the cost of fixed rate debt equals 8.95% plus 1.1% risk premium, which totaled to 10.5% Cost of Debt = (0.5 x 0.08) + (0.5 x 0.105) = 0.095 = 9.25% [since floating rate and fixed rate debt both weigh 50%, we use the weighted average approach to calculate the total cost of debt rate] Based on historical data analysis below, we get an average income tax rate of 42%. | 1978 | 1979 | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | Income before income taxes | 83.5 | 105.6 | 103.5 | 121.3 | 133.7 | 185.1 | 236.1 | 295.7 | 360.2 | 398.9 | Income tax | 35.4 | 43.8 | 40.6 | 45.2 | 50.2 | 76.7 | 100.8 | 128.3 | 168.5 | 175.9 | Tax rate | 42% | 41% | 39% | 37% | 38% | 41% | 43% | 43% | 47% | 44% | | | | | | | | | | | | Average tax rate | 42% | | | | | | | | | | After-tax cost of debt = (1 - 0.42) x 0.0925 = 0.05365 = 5.365% Cost of Equity From Table B and Exhibit 5, * Risk free rate (1-year)= 6.9% Premium = 8.47% * Risk free rate (10-year)= 8.95% Premium = 7.43% ** ** Since A rated bond is considered upper medium grade and the company is A rated, we assume long-term
Total liabilities ÷ Total stockholders' equity 283,800÷292,200=97.1% 248,000÷268,000 = 92.5% j. (Income before taxes+ Interest) Interest (55,000 + 8,000) ÷ 8,000 = 7.9 times (54,800 + 7,200) ÷ 7,200 = 8.6 times k. Plant assets ÷ Long-term debt 270,000 ÷ 132,000 = 2.05 : 1 255,000 ÷ 127,000 = 2.01 : 1 l. Net income ÷ Net sales 32,000 ÷ 230,000 = 13.9% 32,800 ÷ 210,000 = 15.6% m. Net sales ÷ Avg. total assets 230,000 ÷ 546,000=0.42 210,000 ÷ 516,000=0.41* n. Net income ÷ Avg. total assets OR (l.) x (m.) 32,000 ÷ 546,000 = 5.9% 32,800 ÷ 516,000 = 6.4%* o. Net income ÷ Avg.
Return on common stockholders’ equity $29,946,992 - (2430872-15801332) / 200,000 = 82.9% * Solvency ratios 9. Debt to total assets $7,628,563 / 34,825,498 = 22% 10. Times interest earned 3,272,314 / 121,533 = 26.9 Riordan Manufacturing, Inc. Horizontal Analysis for the Balance Sheet Increase or (Decrease) 2010($) 2009($) Amount % Assets Cash $2,807,029 $1,511,253 $1,295,776* 46.1%* Account Receivables $2,695,342 $2,644,307 $51,035 1.9% Current Portion of Note Receivable $102,976 $117,475 ($14,499) (14.1%) Inventory $8,517,203 $7,123,790 $1,393,413 16.4% Deferred Income Taxes – net $0 $0 $0 0% Pre-Paid Expenses and other Items $402,240 $458,875 ($56,635) (14.1%) Total Current Assets $14,524,790 $11,855,700 $2,669,090 18.4% Liabilities Current Liabilities Current Portion of Long-Term Debt $474,032 $484,894 ($10,862) (2.3%) Accounts Payable $1,391,385 $1,636,923 ($245,538) (17.6%) Accrued
Assume an interest rate of 5 percent. 5% interest 1,207,500.00 60,375 1,267,875.00 63,393.75 1,331,268.75 66,563.4375 1,397,832.188 69,891.609 1,467,723.797 73,386.18987 1,541,109.987 77,055.49934 1,618,165.486 80,908.27432 1,699,073.76 84,953.68802 1,784,027.448 89,201.3724 1,873,228.82 93,661.44102 1,966,890.261 98,344.51305 2,065,234.774 It will take about 11-12 years for Metropolis to accumulate $2,000,000. Reference: Baker, Judith J.. Health Care Finance: Basic Tools for Nonfinancial Managers: 3rd Edition, 3rd Edition. Jones & Bartlett
2 1,500.00-2,999.99 225.00 16 % 3. 3 3,000.00-4,999.99 465.00 18 % 4. 4 5,000.00-7,999.99 825.00 20 % 5. 5 8,000.00-14,999.99 1425.00 25 % Input-Process-Output Chart Input Process Output (keyboard) Get salary Sal (real) Sal (real) BaseTax (Float) PctExs (Float) Calculate the Tax Due Sal (real) BaseTax (Float) PctExs (Float) TaxDue (Float) Sal (real) BaseTax (Float) PctExs (Float) TaxDue (Float) Display the Tax Due (Output to screen) Flow Chart Main Module Calculate TaxDue Module Pseudo code Main Module Declare Sal as real numbers Declare TaxDue as Float Declare BaseTax as Float Declare PctExs as Float Declare ExtSal as Float Display “Please enter the salary amout” Input Sal Call Calculate TaxDue Module Call DisplayTaxDue Module End Main Module CalculateTaxDue Module DueTax = BaseTax + PctExs BaseTax = 0.00 PctExs = .15 If 0.00 ≤ Sal ≤ 1,499.99 Then BaseTax = 0.00 PctExs = (Sal – 0.00) * .15 End If If 1,500.00 ≤ Sal ≤ 2,999.99 Then BaseTax = 225.00 PctExs = (Sal – 1,500.00) * .16 End If If 3,000.00 ≤ Sal ≤ 4,999.99 Then BaseTax = 465.00 PctExs = (Sal – 3,000.00) * .18 End If If 5,000.00 ≤ Sal ≤ 7,999.99 Then BaseTax = 825.00 PctExs = (Sal – 5,000.00) * .20 End If
We ran out of time and I was less than clear on the breakpoints, so here is what you need to do. 1. Equity Breakpoint Equity Breakpoint= $ amount of retained earnings% common equity in capital structure+D&A Expense $ amount of retained earnings=1-payout ratio*Net Income=retention ratio*NI Note that common equity in capital structure is we in wstd+wLtd+wp+we=1. In our example, Equity Breakpoint= 1-.3*49,470,000.57+8,249,000=69,001,632 2. Debt Breakpoint Debt Breakpoint= $ amount of senior Debt available% common Long term debt in capital structure+D&A Expense $ amount of senior debt=$41,000,000 in this case Note that long term debt in capital structure is wLtd in wstd+wLtd+wp+we=1.
years. | | The step-by-step calculation is: P | = | S(1 + rt)-1 | | | = | 400,000(1 + 0.0892 x 0.24657534...)-1 | | | = | 400,000 x 0.97847883... | | | = | $391,391.53 | Rounded as last step | b)You are correct. When the first bill matures at time 90 days, the investor purchases a second bill. We must find the purchase price of the second bill. This can be displayed on a time line: | | | | | $P | $400,000 | | | | | | 0 | 90 | 180 | 270 | | | | | | | | | P | = | price | = | unknown | | S | = | Maturity value | = | $400,000 | | r | = | Simple interest rate (decimal) | = | 9.16 | 100 | | = | 0.0916 | | t | = | Time period (years) | = | 90 | 365 | | = | 0.24657534... years.
salaries and benefits 2008- 214129 2009- 220752 cash diff- 6623 % diff- 3.1% (.03092995...) supplies 2008- 71,346 2009-74584 cash diff- 3238 %diff-4.5% (0.453844...) physician and profess fees 2008- 107065 2009- 110376 cash diff-3311 %diff- 4.6% (.046440...) ultities 2008- 1164 2009-1200 cash diff- 36 %diff- 3.1% (.03092...) other 2008- 1785 2009- 1840 diff- 55 %diff- 3%(,03081...) deprecation 2008- 24955 2009- 36036 diff- 11081 %- 44%(.44403..) intrest 2008- 3597 2009- 3708 diff- 111 %- 3%(.030850..) provision 2008- 13383 2009- 13797 diff- 414 %- 3.1%(.03093..) total expenses 2008- 437424 2009- 462293 diff-24869 %- 5.7% (.056853..) operating income 2008- (-16,110) 2009- 689 cash diff- (-15421) %diff- 95% (.9572...) * Even though my cash difference shows a negative number I did not put in red on the worksheet because the hospital had more money in 2009 compared to 2008 non operating come both years blank investment income 2008- 264 2009- (-62) diff -326 %diff -123% (-1.2348...) * On my sheet I put the % in the red to show a lost since the hospital ended up with less money in 2009 compared to 2008 net income 2008 (-15846) 2009- 627 cash diff- 16473 %diff-
Since Profit Margin are calculated using EBIT, Income Tax plays a great role to affecting the results. Step Seven….figures are in $000’s TOTAL | 2012 | 2011 | 2010 | 2009 | Current Asset | 55,838 | 64,438 | 53,315 | 70,140 | Non-Current Asset | 69,936 | 75,013 | 75,879 | 71,528 | Asset | 119,774 | 139,451 | 129,194 | 141,668
Notes Payable | 12000 | | Interest Payable | 9000 | | Total Current Liabilities | 58500 | | Long Term Liabilities | | | Notes Payable | 28000 | | Total Liabilities | | 86500 | Stockholder's Equity | | | Common Stock | 205500 | | Retained Earnings - December 31 | 97400 | | Total Stockholder's Equity | | 302900 | Total Liabilities & Stockholder's Equity | | 389400 | Elker Fashions Incorporated Closing Entries For Year Ended December 31, 2008 Date | Account Title & Explanation | Debit | Credit | 31-Dec | Merchandise Inventory - December 31 | 80000 | | | Sales | 865800 | | | Purchase Discounts | 16400 | | | Income Summary | | 962200 | | (To record ending inventory and close accounts with credit balances) | | | | | | | 31-Dec | Income Summary | 860100 | | | Depreciation Expense - Buildings | | 12000 | | Depreciation Expense - Equipment | | 10000 | | Gas & Oil Expense | | 7600 | | Salary Expense | | 70700 | | Utilities Expense | | 11400 | | Repair Expense | | 5900 | | Insurance Expense | | 3500 | | Sales Discounts | | 6100 | | Purchases | | 720000