Which of the following statements is CORRECT? Answer: e. If the interest rate the companies pay on their debt is less than their earning power. (BEP), then Company HD will have the higher ROE. 4. Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity $280,000 Total Assets $420,000 Total liab.
Let (R/P)1 equal the initial value of the real rental price of capital, and (R/P)2 equal the final real rental price of capital after the labour force increases by 10 percent. The rental price increases by The real rental price also increases by 6.9 percent. Let (W/P)1 equal the initial value of the real wage, and (W/P)2 equal the final real wage after the labour force increases by 10 percent. The real wage increases by The real wage decreases by 2.8 percent. c) Using the same logic as (b) So, output increases by about 3 percent.
. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5) Reduced legal liability for investors Harder to transfer ownership Lower taxes Most common form of organization 2. (TCO A) The Dividends account _____. (Points : 5) is increased with a debit is decreased with a credit is not an expense account All of the above 3.
$30.0 FI504 Final Exam Business - General Business 1. (TCO A) An advantage of the corporate form of business is that _____. (Points : 5) it has limited life its owner's personal resources are at stake its ownership is easily transferable via the sale of shares of stock it is simple to establish 2. (TCO A) The Dividends account _____. (Points : 5) is increased with a debit is decreased with a credit is not an expense account All of the above 1.
Page 484 has formulas!! 6. When the firms maintains a target leverage ratio, we compute its levered value V^L as the present value of its free cash flows using the WACC, whereas its unlevered value V^U is the present value of its free cash flows using its unlevered cost of capital or pretax WACC. 15.3 Recapitalizing to Capture the Tax Shield 1. when securities are fairly priced, the original shareholders of a firm capture the full benefit of the interest tax shield from an increase in leverage 15.4 Personal
Comparing the company’s net income to its actual cash generated, an investor can determine whether the company is more aggressive or conservative in accounting for its performance. 2. What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings? Year 1 - Free Cash Flow: 7,512,000; Accounting Profits Earned: 7,154,500 Year 2 - Free Cash Flow: 14,972,000; Accounting Profits Earned: 12,340,000 Year 3 - Free Cash Flow: 15,288,000; Accounting Profits Earned: 14,110,000 Year 4 - Free Cash Flow: 8,736,000; Accounting Profits Earned: 8,190,000 Year 5 - Free Cash Flow:
Debt to assets ratio $1,202,134 (total debt) / $1,404,726 (total assets) = 87.4% B.) ROA is a measure of profitability or effectiveness of resource usage calculated by expressing a company’s net income as a percentage of total assets. As for Sepracor, its ROA is 4.5%. This means that Sepracor created 4.5 cents of earnings from each dollar of assets. The ROE for Sepracor is 33.07%, which means that 33.07 cents of assets are created for each dollar that was originally invested.
What are earnings if the owners invest (use their own money) for the $800 needed to start? b. If the firm borrows $400 of the $800 at an interest rate of 10%, what are the firm's net earnings? c. What is the return on the owners' investment in each case? Why do the returns differ?
FI 515 Homework week 2. 3-1 Days Sales Outstanding Days sales outstanding= receivables/ave sales per day= receivables/annual sales/365) 20 days x $20,000= $400,000 3-2 Debt Ratio Debt ratio formula=Debt ratio +equity ratio=1 Equity ratio = 1/EM….the equity multiplier is 2.5 1 / 2.5 = .40 equity ratio Debt ratio= debt ratio +equity ratio=1 1-equity ratio=debt ratio 1-.40=.60%=debt ratio 3-3 Market/Book Ratio Market value per share =$75 Common equity =6 billion Number of shares outstanding =800M Market value per share/ (common equity/# of shares outstanding)= market/book ratio $75/(6,000,000/800,000,000) = $75/7.5 10 billion= market to book ratio 3-4 PE Ratio Price per share/earnings per share= P/E Price per share/cash flow per share= Price/cash flow
Sketch out a cash flow diagram for this project. 3,956,000 8,416,000 10,900,000 8548,000 5,980,000 -8,100,000 5. What is the project’s net present value? The project’s net present value is 16,731,096 6. What is its internal rate of return?