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Fin 370 Week 3 Problems Essay

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Below is an essay on "Fin 370 Week 3 Problems" from Anti Essays, your source for research papers, essays, and term paper examples.

Problem 4-6 (Capital structure analysis)
The Liabilities and owner’s equity for Campbell Industries is found below:
Accounts Payable = $544,000
Notes Payable = $242,000
Current Liabilities = $786,000
Long-Term Debt = $1,300,000
Common Equity = $4,697,000
Total Liabilities and Equity = $6,783,000
A. What percentage of the firm’s assets does the firm finance using debt (liabilities)? (Round to one decimal place)
B. If Campbell was to purchase a new warehouse for $1.1 million and finance it entirely with long-term debt, what would be the firm’s new debt ration?

Solution:
Total liabilities and equity = Total Assets = $6,783,000
Long term debt = $1,300,000
Current liabilities = $786,000
Total liabilities = $2,086,000

The fraction of the firm’s assets financed using debt
= Debt
Total Assets
= $2,786,000
$6,783,000
= 30.75%

If the firm purchase a new warehouse for $1.1 million and finance it entirely with long-term debt, the total liabilities and total assets would increase by the same amount. Hence, the debt ratio would undergo change.
Total liabilities = $3,186,000
Total Assets = $7,883,000

Debt ratio
= $3,186,000
$7,883,000
= 40.42%

Problem 13-9 (Break even analysis)

Accounting break even units = Fixed cost + Depreciation
Selling price per unit – Variable cost per unit
Project A

6270 = 99000 + 26000
SP - 54
6270 SP – 338580 = 125000
6270 SP = 463580
Selling price = 73.94 per unit

Project B
730 = 495000 + 101000
990 – VC
722700 – 730 VC = 596000
730 VC = 126700
Variable cost = 173.56 per unit

Project C

2000 = 4800 + D
22 - 13
18000 = 4800 + D
Depreciation = $13200

Project D

2000 = FC + 17000
22 – 6
32000 = FC + 17000
Fixed cost = $15000

Project | Accounting BEP units | Price per unit | Variable cost per unit | Fixed cost | Depreciation |
| | | | | |
A | 6270 |   $       73.94 |   $               54 |   $             99,000 |   $...

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Fin 370 Week 3 Problems. Anti Essays. Retrieved February 18, 2019, from the World Wide Web: https://www.antiessays.com/free-essays/Fin-370-Week-3-Problems-368707.html