Loi Nguyen ECB 352 J & L Railroad Assignment Questions 1. Should J & L hedge all of its exposure to diesel fuel? What percentage of the 4.5 million gallons per month would you hedge? Yes they should hedge but not necessarily all of its exposure to diesel fuel. Since the 4.5 million is just an expected amount of fuel, J&L cannot achieve a perfect hedge in the future.
The elimination of short-term debt shows that Home Depot, Incorporated is not using such debt to meet short-term cash requirements. The cause of the elimination of short term debt may be caused by the improved cash position and the economy. Home Depot, Incorporated’s financial position and ratios look good. In fiscal year 2008, the long-term debt-to-equity ratio was 54.4% compared to fiscal year 2007’s 64.3%. In fiscal year 2008, the return on invested capital of continuing operations was 9.5% compared to fiscal year 2007’s 13.9%.
2. I utilized an “Acid Test Ratio” which shows us whether the entity could pay all its current liabilities if they became due now or sooner than expected. In 2011, the acid test ratio was 0.64. By 2012, it decreased to 0.43. Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities.
An example of this is the change in the federal funds rate. The Federal Reserve has targeted its federal funds rate at or near 0%. Currently, the federal funds rate is at 0.5%. To put this in perspective, the federal funds rate in August of 2007 was 5.25%. This is an attempt by the Fed to encourage citizens to borrow money from the banks at a very low rate.
(0.5 points) Credit is a commitment to pay for something in the future, instead of paying for it right away 2. What is a credit score? (0.5 points) Your credit score is a number that tells lenders how likely you are to make payments on time. 3. What is installment credit?
It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not a favorable purchase for Mr. Jones. Ina a case where the tax identity of a firm does not cease not to exist, the tax aspects will remain the same and so will the existing tax schedule. So in this case it would mean that Mr. Jones would not be allowed to change the financial year to end on December 31. The buyer in cases where he can’t change the legal entity is in a non -benefice situation, the buyer is limited to follow the current tax basis on the company’s assets even if the buyer paid more for the
“We intend to retain our earnings to finance the expansion of our business and do not anticipate paying cash dividends in the foreseeable future……Dividend Payments are restricted by our bank credit facilities to 50% of our net income for the immediately preceding fiscal year.”i Cash Flow Statement Analysis: Krispy Kreme uses the Indirect Method of reporting Operating Cash Flows. In 2001 the cash provided by operating activities was $32,112 (Thousand), while the Cash dividends was $7,005 (Thousand). Cash provided by operating activities exceeded the cash paid for dividends. The company did not
This is partly a practical decision given that we have not provided rates beyond 20 year term in the book. We use the quoted value for $250,000 policies pro-rated to the size of policy we need, and this is incorrect — policy premiums per dollar decline as the size of the policy rises, since some costs are fixed. However, it is the best we have, and the difference will not be
2-How does this value affect the choice of securities in which to invest? Ans. This valuation shows that the cost of the equity is more than that of the cost of the debt. The H partners should finance the six flags through debt rather than that of the equity. The plan assigned 95% of the Company’s equity to SFO bondholders and 5% to SFI bondholders.
Financiering 6012B0217 Financiering Case 2012/2013 Vraag 1 a) Excel regression (ongecorrigeerde beta) equity beta van ING: 1.972874 ASML: 1,002967 Ahold: 0,395736 b) We know that there is a linear relationship between the stock beta and its expected return. So, if there is fewer stock the security market line will be steeper so, the beta will be smaller. Vraag 2 ßu = ßa= (E/(D+E)) x ße Net debt: Interest Bearing Debt – Cash and Cash Equivalents ING: 47284/(1234038+47284) x 1,972874 = 0,07280 Debt: 1247110-13072=1234038 ASML: 2773908/(1456616+2773908) x 1,002967 = 0,65763 Debt: 3406450-1949834=1456616 Ahold: 5910/(6215+5910) x 0,395736 = 0,192891 Debt: 8815-2600=6215 Vraag 3 a) ASML has a higher asset beta because it participates in an market which develops faster, so it has a higher systematic risk. Ahold has a lot of more diversity on his business. Ahold can better spread his risk.