1.) Rate of return equity to investors (There should be 3 answers, representing the 3 options) 2.) Percent of Leverage on the company (There should be 3 answers, representing the 3 options) 3.) Using your answers from items 1-2, what strategic option will you suggest that will have the most earnings for De La Rosa Corporation?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1.) Rate of return equity to investors (There should be 3 answers, representing the 3 options) 2.) Percent of Leverage on the company (There should be 3 answers, representing the 3 options) 3.) Using your answers from items 1-2, what strategic option will you suggest that will have the most earnings for De La Rosa Corporation?
EQUITY
Stockholder's Equity
Retained Earnings
Total stockholder's equity
Total liabilities and equity
Outstanding shares
100,000
22,400
122,400
202,000
1000 shares (Par Value - P10
Transcribed Image Text:EQUITY Stockholder's Equity Retained Earnings Total stockholder's equity Total liabilities and equity Outstanding shares 100,000 22,400 122,400 202,000 1000 shares (Par Value - P10
Statement of Financial Position of De La Rosa Corporation (no answer needed on this)
Suppose the company is planning to undertake a certain business project that will require
an investment of P120,000 so as to increase its operating income by P50,000. The current
operating income of the company is 82,000 and Income tax is at 30%.
As the Finance Manager, three options have been presented to you:
Option 1: Obtain a P120,000 loan with annual interest of 10%.
Option 2: Issue an additional of 500 shares capital stock at a market price of P120 per
share and obtain P60,000 bank loan with an annual interest of 5%.
Option 3: Issue an additional of 1,000 shares capital stock at market price of P120 per
share.
By using these 3 financial alternatives, find the following (next questions):
ASSETS
Cash on hand and in Bank
Receivables
Inventories
Organizational Expense
Furniture & Fixtures
Office equipment
Total assets
LIABILITIES
Accounts Payable
Income Tax Payable
Mortgage Loan Payable
Total liabilities
15,000
60,000
24,000
40,000
18,000
45.000
202,000
20,000
9,600
50,000
79,600
Transcribed Image Text:Statement of Financial Position of De La Rosa Corporation (no answer needed on this) Suppose the company is planning to undertake a certain business project that will require an investment of P120,000 so as to increase its operating income by P50,000. The current operating income of the company is 82,000 and Income tax is at 30%. As the Finance Manager, three options have been presented to you: Option 1: Obtain a P120,000 loan with annual interest of 10%. Option 2: Issue an additional of 500 shares capital stock at a market price of P120 per share and obtain P60,000 bank loan with an annual interest of 5%. Option 3: Issue an additional of 1,000 shares capital stock at market price of P120 per share. By using these 3 financial alternatives, find the following (next questions): ASSETS Cash on hand and in Bank Receivables Inventories Organizational Expense Furniture & Fixtures Office equipment Total assets LIABILITIES Accounts Payable Income Tax Payable Mortgage Loan Payable Total liabilities 15,000 60,000 24,000 40,000 18,000 45.000 202,000 20,000 9,600 50,000 79,600
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