b. Compute earnings per share under the Silverman plan. (Round your answer to 2 decimal places.)Earnings per share Check my work6.Mr. Gold is in the widget business. He currently sells 1.5 million widgets a year at $6 each. His variable cost to produce the widgets is$4 per unit, and he has $1,550,000 in fixed costs. His sales-to-assets ratio is six times, and 30 percent of his assets are financed with10 percent debt, with the balance financed by common stock at $10 par value per share. The tax rate is 35 percent.1.42His brother-in-law, Mr. Silverman, says Mr. Gold is doing it all wrong. By reducing his price to $5.00 a widget, he could increase hisvolume of units sold by 60 percent. Fixed costs would remain constant, and variable costs would remain $4 per unit. His sales-to-assets ratio would be 7.5 times. Furthermore, he could increase his debt-to-assets ratio to 50 percent, with the balance in commonstock. It is assumed that the interest rate would go up by 1 percent and the price of stock would remain constant.pointseBook

Information Provided: Price of widget = $5 Quantity of widgets = 1,500,000 Increase in sales = 60%…

Answered: b. Compute earnings per share under the…

Business

Finance

b. Compute earnings per share under the Silverman plan. (Round your answer to 2 decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Mr. Gold is in the widget business. He currently sells 1.9 million widgets a year at $6 each. His variable cost to produce the widgets is $4 per unit, and he has $1,590,000 in fixed costs. His sales-to-assets ratio is six times, and 30 percent of his assets are financed with 7 percent debt, with the balance financed by common stock at $10 par value per share. The tax rate is 40 percent. His brother-in-law, Mr. Silverman, says Mr. Gold is doing it all wrong. By reducing his price to $5.00 a widget, he could increase his volume of units sold by 40 percent. Fixed costs would remain constant, and variable costs would remain $4 per unit. His sales-to-assets ratio would be 7.0 times. Furthermore, he could increase his debt-to-assets ratio to 50 percent, with the balance in common stock. It is assumed that the interest rate would go up by 1 percent and the price of stock would remain constant. a. Compute earnings per share under the Gold plan. (Round your answer to 2 decimal places.)…
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 50 hours each week, the company's EBIT will be $645,000 per year; if he works a 60-hour week, the company's EBIT will be $815,000 per year. The company is currently worth $4.15 million. The company needs a cash infusion of $2.25 million and can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder?
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 45 hours each week, the company's EBIT will be $555,000 per year; if he works a 55-hour week, the company's EBIT will be $635,000 per year. The company is currently worth $3.25 million. The company needs a cash infusion of $1.35 million and can issue equity or issue debt with an interest rate of 7 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder? a. Debt issue and 45-hour week a. Debt issue and 55-hour week a. Equity issue and 45-hour week a. Equity issue and 55-hour week b. Which form of financing is Tom likely to work harder?
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $630,000 per year; if he works a 50-hour week, the company's EBIT will be $785,000 per year. The company is currently worth $4 million. The company needs a cash infusion of $2.1 million and can issue equity or issue debt with an interest rate of 10 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder? a. Debt issue and 40-hour week Debt issue and 50-hour week Equity issue and 40-hour week Equity issue and 50-hour week b. Which form of financing is Tom likely to work harder?
7. Jayden and Ziad own four identical pizza shops in downtown Newark. Each shop has a debt-to- equity ratio of 35 percent and makes interest payments of $52,000 at the end of each year. The cost of the firm's levered equity is 16 percent. Each store estimates that annual sales will be $1,450 million. The annual cost of goods sold will be $780,000. The owners estimated annual SG&A costs will be $450,000. Note also that these cash flows are expected to remain the same forever. Estimated corporate tax is 21 percent. A) Use the flow to equity approach to determine the value of the company's equity. B) Determine the total value of J&Z Pizza shops to date.
Suppose an investor gave you 150,000 to start a business.you gave investor 50 percent of your investment .Your revenue one was $479,600,your goods sold was $239,600 and your total operating expenses was $144,080.What ROI will your investor receive this year for his 50 percent ownership in the company?
Harvey quit his job where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The total revenues for the firm in the first year were: Multiple Choice O $605,000 $825.000 $50,000 $100,000 O
Suppose you sell8000 of the 3 pack of lenses in one year. your cost on each 3 pack is $29.95 and you sell them for $59.95 .If your operating expenses for the year total is $144,080,what are your net income and net profit margin percentage?
Hebner Housing Corporation has forecast the following numbers for this upcoming year: Sales = $1,000,000. Cost of goods sold = 600,000. Interest expense = 100,000. Net income = 180,000.The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company’s sales were to increase to $1.5 million, its cost of goods sold would increase to $900,000. The company’s CEO is unhappy with the forecast and wants the firm to achieve a net income equal to $240,000. In order to achieve this level of net income, what level of sales will the company have to achieve? Assume that Hebner’s interest expense remains constant.
Harvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.
Tom borrowed $40,000 from his parents to open a donut stand. He agrees to pay his parents a 5% yearly return on the money they lent him. His other yearly fixed costs equal $10,000. His variable costs equal $25,000. He sold 40,000 dozen donuts during the year at a price of $2.00 per dozen. Tom's economic profit is: O $80,000 O $43,000 O $45,000 O $37,000
Suppose you sell 8,000 of the 3 pack of lenses described in question 3 above in one year. You cost on each 3 pack is $29.95 and you sell them for $59.95. If your operating expenses for the year total $144,080, what are your Net Income and Net Profit Margin Percentage?

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