PROBLEM A.A. ABC Corp., expects a net income of Php. 250,000. Thecompany has 10% of 5,000,000 Debentures. Theequity capitalization rate of the company is 10%.1. Calculate the value of the firm and overallcapitalization rate according to the net incomeapproach (ignoring income tax).2. If the debenture debt is increased to Php.750,000 and interest of debt is change to 8%.What is the value of the firm and overallcapitalization rate?B. Yuki's projected net operating income of Php. 85,000.It has Php. 3,00,000, 5% debentures.1. Calculate the value of the firm according to 10 netopening income and overall capitalization rate is10%.2. If debenture debt is increased to Php. 100,000. Whatis the value of the firm and the equity capitalizationrate?

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Answered: A. ABC Corp., expects a net income of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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IXYZ Ltd., experts a net income of $150,000. The company has 10% 500,000 debentures. The equity capitalization rate of the company is 10%.g(a) Calculate the value of the firm and overall capitalization rate accordint the net income approach (ignore income tax).(b) If the debenture debt is increased to $750,000 and interest of debt inchange to 9%. What is the value of the firm and overall capitalizatiorate?
PT. Sentosa Raya uses its own capital and debt capital. The agreed cost of debt is 10% and the interest to be paid on the debt is Rp. 3,000,000. The company earned an operating profit of Rp. 24,000,000 per year. The expected return is 30% per year. With these data, determine the value of the company and the company's cost of capital!
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XYZ Ltd., experts a net income of $150,000. The company has 10% of 500,000 debentures. The equity capitalization rate of the company is 10%. (a) Calculate the value of the firm and overall capitalization rate according t the net income approach (ignore income tax). (b) If the debenture debt is increased to $750,000 and interest of debt is change to 9%. What is the value of the firm and overall capitalization rate?
Lever Age pays a(n) 8% rate of interest on $10.6 million of outstanding debt with face value $10.6 million. The firm’s EBIT was $1.6 million. a. What is times interest earned? (Round your answer to 2 decimal places.) Times interest earned b. If depreciation is $260,000, what is cash coverage? (Round your answer to 2 decimal places.) Cash coverage c. If the firm must retire $360,000 of debt for the sinking fund each year, what is its “fixed-payment cash-coverage ratio” (the ratio of cash flow to interest plus other fixed debt payments)? (Round your answer to 2 decimal places.) Fixed-payment cash-coverage ratio
A firm has a profit margin of 15 percent on sales of GHS20,000,000. If the firm has debt of GHS7,500,000, total assets of GHS22,500,000, and an after-tax interest cost on total debt of 5 percent, what is the firm?s ROA? O A. 8.4% B. 10.9% O C. 12.0% D. 13.3% E. 15.1%
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Referring to table below, calculate the market value of firm L (without a corporate income tax) if the equity amount in its capital structure decreases to $5,000 and the debt amount increases to $5,000. At this capital structure, the cost of equity is 15 percent. Round your answer to the nearest dollar. Firm U Firm L Net operating income (EBIT) $ 1,000 $ 1,000 Less: Interest payments to debt holders, I - 100 Income available to stockholders (dividends), D $ 1,000 $ 900 Total income available to security holders, I + D $ 1,000 $ 1,000 Required rate of return on debt, kd - 5 % Market value of debt, B = I/kd - $ 2,000 Required rate of return on equity,ke 10 % 11.25 % Market value of equity, E = D/ke $ 10,000 $ 8,000 Market value of firm, E + B $ 10,000 $ 10,000 $
3. The average net profits expected in future by Khalifa and Co. are RO. 30,000 per year. The average capital employed in the business by firm is RO. 200,000. The normal rate of return on the capital employed in similar business is 10%. Calculate good will of the firm by: 1. Super Profit Method on the basis of two-year purchase 2. Capitalization Method

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