FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- Mikey's Bar and Grill has total assets of $23 million, of which $17 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Mikey's gross plant and equipment has a book value of $18.5 million, and other long-term assets have a book value of $400,000.arrow_forwardCurrently, Atlas Tours has $5.4 million in assets. This is a peak six-month period. During the other six months temporary current assets drop to $400,000 (for computation purposes still consider these temporary current assets). Temporary current assets $1,200,000 Permanent current assets 1,800,000 Capital assets 2,400,000 Total assets $5,400,000 Short-term rates are 4 percent. Long-term rates are 5 percent. Annual earnings before interest and taxes are $1,080,000. The tax rate is 38 percent. a. If the assets are perfectly hedged throughout the year, what will earnings after taxes be? (Enter answers in whole dollar, not in million.) Earnings after taxes $ b. If short-term interest rates increase to 5 percent when assets are at their lowest level, what will earnings after taxes be? For an example of perfectly hedged plans, see Figure 6–8 (Enter answers in whole dollar, not in million.) Earnings after…arrow_forwardCurrently, Atlas Tours has $5.4 million in assets. This is a peak six-month period. During the other six months temporary current assets drop to $400,000 (for computation purposes still consider these temporary current assets). Temporary current assets $1,200,000 Permanent current assets 1,800,000 Capital assets 2,400,000 Total assets $5,400,000 Short-term rates are 4 percent. Long-term rates are 5 percent. Annual earnings before interest and taxes are $1,080,000. The tax rate is 38 percent. a. If the assets are perfectly hedged throughout the year, what will earnings after taxes be? (Enter answers in whole dollar, not in million.)arrow_forward
- Russell’s has annual revenue of $387,000 with costs of $216,400. Depreciation is $48,900 and the tax rate is 30 percent. The firm has debt outstanding with a market value of $182,000 along with 9,500 shares of stock that is selling at $67 a share. The firm has $48,000 of cash of which $29,500 is needed to run the business. What is the firm’s EV/EBITDA ratio? a, 5.57 b. 4.69 c. 3.39 d. 3.93 e. 6.20arrow_forwardGibson Company sales for the Year 1 were $2 million. The firm’s variable operating cost ratio was 0.45, and fixed costs (that is, overhead and depreciation) were $700,000. Its average (and marginal) income tax rate is 40 percent. Currently, the firm has $2.4 million of long-term bank loans outstanding at an average interest rate of 13.0 percent. The remainder of the firm’s capital structure consists of common stock (140,000 shares outstanding at the present time). Calculate Gibson’s degree of combined leverage for Year 1. Round your answer to two decimal places. Gibson is forecasting a 8 percent increase in sales for next year (Year 2). Furthermore, the firm is planning to purchase additional labor-saving equipment, which will increase fixed costs by $130,000 and reduce the variable cost ratio to 0.430. Financing this equipment with debt will require additional bank loans of $400,000 at an interest rate of 13.0 percent. Calculate Gibson’s expected degree of combined leverage for…arrow_forwardNovak Corporation's net income for the current year was $622000, Depreciation recorded on plant assets was $58000 and amortization expense was $93000. Accounts receivable and inventories increased by $49000 and $20000, respectively. Supplies and accounts payable decreased by $2000 and $39000, respectively. The equipment account balance increased by $55,000 and a $500,000 convertible bond was retired through the issuance of common stock. How much cash was provided by operating activities? O $565000 $667000 O $585000 $879000arrow_forward
- McEwen mining recently reported $130000 off sales$68500 of operating cost other than depreciation and $10200 off depreciation. The company has $20000 of outstanding bonds that carry a 6% interest rate and its tax rate was 35%. what was the firms net incomearrow_forwardColter Steel has $4,550,000 in assets. Temporary current assets $ 1,100,000 Permanent current assets 1,505,000 Fixed assets 1,945,000 Total assets $ 4,550,000 Assume the term structure of interest rates becomes inverted, with short-term rates going to 13 percent and long-term rates 2 percentage points lower than short-term rates. Earnings before interest and taxes are $970,000. The tax rate is 20 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?arrow_forwardLudwing Mining has $8,000,000 in sales, its ROE is 20% , and its Total Asset Turnover ratio is 2.00. Common Equity on the balance sheet is 50% of its total assets. What is its Net Income?arrow_forward
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