Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Last year Gray Corp. had net sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-capital ratio was 45.0%. The firm uses only debt and common equity as financing. Based on the DuPont equation, what was the
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- Purple Panda Products Inc. has a total asset turnover ratio of 3.50x, net annual sales of $25 million, and operating expenses of $11 million (including depreciation and amortization). On Its balance sheet and income statement, respectively, it reported total debt of $2.50 million on which It pays a 7% interest rate. To analyze a company's financial leverage situation, you need to measure the firm's debt management ratios. Based on the preceding Information, what are the values for Purple Panda's debt management ratios? Ratio Debt ratio Times-interest-earned ratio Valuearrow_forward(DuPont analysis) Garwryk, Inc., which is financed with debt and equity, presently has a debt ratio of 76 percent. What is the firm's equity multiplier? How is the equity multiplier related to the firm's use of debt financing (i.e., if the firm increased its use of debt financing would this increase or decrease its equity multiplier)? Explain. ... What is the firm's equity multiplier? The equity multiplier is given by: 1 Equity Multiplier = 1- Debt Ratio The equity multiplier is (Round to two decimal places.)arrow_forwardYyristki Inc. has an equity market value of $4,750,390 and debt market value of $3,379,920. The cost of equity capital is 11.58% and the cost of debt capital is 6.21%. What is the firm's Weighted Average Cost of Capital (WACC)?arrow_forward
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- Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-capital ratio was 17.5%. The firm finances using only debt and common equity, and its total assets equal total invested capital. Based on the DuPont equation, what was the ROE? Do not round your intermediate calculations. O a. 9.49% O b. 11.52% O c. 9.21% O d. 7.74% O e. 9.86%arrow_forwarda. Last year Harrington Inc. had sales of $654,000 and a net income of $89,000, and its year-end assets were $270,000. The firm's total-debt-to-total-capital ratio was 45.0%. The firm finances using only debt and common equity and its total assets equal total invested capital. Based on the DuPont equation, what was the ROE?arrow_forwardJones Soda estimates that its required return on equity is 11.0 percent and the yield to maturity on its debt is 6.0 percent. The company's equity-to-asset ratio is 0.2 and the marginal tax rate is 30%. What is the company's weighted average cost of capital? Enter your answer as a percent and round to two decimals, but don't include the % sign. Numeric Responsearrow_forward
- Gamma Inc. has a weighted average cost of capital of 18.60%. The firm’s cost of equity is 24.40%, and it’s cost of debt is 15%. The tax rate is 34%. What is Gamma’s debt-to-equity ratio?arrow_forward(Financing decisions) Brussels Electronics, Inc, has total assets of $64 million and total debt of $45 million. The company also has operating profits of $23 millions with interest expenses of $7 million. a. What is Brussels Electronic's debt ratio? b. What is Brussels Electronic's time interest earned? c. Based on the information above, would you recommend to Brussels Electron-ics's management that the firm is in a strong enough position to assume more debt and increase interest expense to $9 million?arrow_forwardA company finances its operations and growth opportunities, using common equity and debt. The debt-to-equity ratio of the CI Corp. is 0.3. If its cost of equity is 14%, and its pretax cost of debt is 5%, what comes closest to the company’s WACC? The tax rate is 21%. 6.7% 4.5% 7.1% 6.3% 5.8% The answer is not 7.1%arrow_forward
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