Roland & Company has a new management team that has developed an operating plan to improve upon last year’s ROE. The new plan would place the debt ratio at 55 percent, which will result in interest charges of $7,000 per year. EBIT is projected to be $25,000 on sales of $270,000, it expects to have a total assets turnover ratio of 3.0, and the average tax rate will be 40 percent. What does Roland & Company expect its return on equity to be following the changes?
Q: The Fierro Corporation has annual credit sales of $6 million. Current expenses for the collection…
A: Calculation of Incremental profit after tax using excel is as follows:
Q: Ghost, Inc., has no debt outstanding and a total market value of $140,000. Earnings before interest…
A: Earnings per share is the sum receivable by a common shareholder from the company on every single…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Solution: a) Income statement and Balance sheet balances: First, we know that fixed assets will be…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Since you have posted a question with multiple sub-parts, we will solve first subparts for you. To…
Q: expected return on equity under each alternative
A: SOLUTION:- a) Current Asset Policy of 40% Sales= $3 million Current Assets= 40%*$3 million= $1200000…
Q: obin Supplies Company expects sales next year to be $500,000. Inventory and accounts receivable will…
A: The fund that a company raises by using external sources such as issuing equity or bonds is term as…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Workings:
Q: Minion, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest…
A: Total market value = $240,000 EBIT = $28,000 In case of expansion EBIT will be 10% higher. In case…
Q: Minion, Inc., has no debt outstanding and a total market value of $284,900. Earnings before interest…
A: There are uncertainties in the market and different conditions are possible and under these…
Q: Last year, K9 WebbWear, Inc. reported an ROE of 22 percent. The firm’s debt ratio was 50 percent,…
A: Total assets can be calculated as shown below.
Q: Minion, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Net fixed assets grow by $200, which is 25% of the current value of $800. Therefore, for the…
Q: Aqua Corp. is considering a change in marketing strategy which would cost $100,000 per year…
A: The cash conversion cycle shows that how effectively the company's managers deal with their working…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Debt ratio: It is the solvency ratio that shows the ability of the company to pay off its…
Q: Rector Corporation, which is currently operating at full capacity, has sales of $29,000, current…
A: Sales, S = $29,000,Current assets, CA = $1,600; Net fixed assets, NFA = $27,500, Hence, total…
Q: The S&H construction company expects to have total sales next year totaling $14,500,00 In addition,…
A: Given information, Total Sales =$14,500,000 Interest expenses =$318,000 Cost of goods sold =58% of…
Q: . How would each of these plans affect earnings per share? Consider the current plan and the two new…
A: Answer a:
Q: The return on equity will be <List A> and the debt ratio will be <List B> under…
A: The question is based on the concept of capital structure and the effective cost of capital. The…
Q: Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with…
A: Yield to maturity of the bond is the return which investors would get I the bond is held till…
Q: Last year Jullan Corp. had sales of P302,225 operating costs of P267,500 and year-end assets of…
A: Ratio is a tool which is used to measure the firm’s performance by establishing relation of…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Increase in net fixed assets every year=$2,40,000 for the next five years Thus total increase is 25%…
Q: Required: a1. Produce an income statement for 2020. Assume that net working capital will equal 50%…
A: Information Provided: Increase in net fixed assets = $200,000 Revenues to Total assets = 1.50 Annual…
Q: Roland Company has a new management team that has developed an operating plan to improve upon last…
A: Return on equity - it means company's earnings on equity share capital after deducting all expenses…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: mployees at JPGR Inc have been busy evaluating a potential new $9 million investment for their firm…
A: NPV is a Capital Budgeting Techniques which help in decision making on the basis of future Cash…
Q: Phil plc and Costas plc are identical firms except that Costas is more levered. Both companies will…
A: in this we have to calculate expected profit.
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Assets= net working capital+fixed assets Liabilities=debt+equity
Q: Coastal Packaging’s ROE last year was only 3 percent, but its management has developed a new…
A: We will have to make use of various ratios to figure out our answer.
Q: A DI has assets of $10 million consisting of $1 million in cash and $9 million in loans. The DI has…
A: Liquidity Risk When the bank or financial institution is unable to meet its short-term debt…
Q: The management of Peerless Fabrics Inc. is considering a change in its capital structure. Currently,…
A:
Q: Pacific Packaging’s ROE last year was only 5%, but its managementhas developed a new operating plan…
A: Given information: Debt to capital ratio is 40%, Annual interest charges is $561,000 EBIT is…
Q: National Co. has the opportunity to increase its annual sales by P125,000 by selling to a new,…
A: Manufacturing and selling expense = 125,000 x 70% = 87,500 Uncollectible expense = 125,000 x 10% =…
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Solution Balance sheet is a statement of business assets , liabilities and owners equity as of any…
Q: The management of Peerless Fabrics Inc. is considering a change in its capital structure. Currently,…
A: Hello. Since your question has multiple sub-parts, we will solve the first three sub-parts for you.…
Q: Packaging's ROE last year was only 4%, but its management has developed a new operating plan that…
A:
Q: The following tables contain financial statements for Dynastatics Corporation. Although the company…
A: Financial Statements:- These are statements prepared by the company in order to know its financial…
Q: Ghost, Inc., has no debt outstanding and a total market value of $395,600. Earnings before interest…
A: a.1Computation of EPS:Excel spread sheet:
Q: The ROE of the Midwest Corporation last year was only 3%. [Note: This information is irrelevant in…
A: The return on equity is the percentage earned on the equity investment made by the company. It shows…
Q: Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount…
A: Assets is the resource that generates that generates potential benefits in the future for any…
Q: ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding…
A: Cost of Debt refers to cost incurred by an entity for having debt fund in capital structure.
Q: The Calgary Company is attempting to establish a current assets policy. Fixed assets are $600,000,…
A: Return on Equity (ROE) represents the company’s profitability over the owner’s capital. It can be…
Q: The S&H construction company expects to have total sales next year totaling $15,300. In addition,…
A: Sales = 15,300 Tax Rate = 35% Interest Expense = 280,000 Cost of goods sold = 57% of Sales Operating…
Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…
A: Break even point in dollars = fixed cost /contribution ratio
Q: Ghost, Inc., has no debt outstanding and a total market value of $395,600. Earnings before interest…
A: Re Capitalization A corporate reorganization where a substantial change is happening in a…
Roland & Company has a new management team that has developed an operating plan to improve
upon last year’s ROE. The new plan would place the debt ratio at 55 percent, which will result in
interest charges of $7,000 per year. EBIT is projected to be $25,000 on sales of $270,000, it expects to
have a total assets turnover ratio of 3.0, and the average tax rate will be 40 percent. What does Roland
& Company expect its
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- Roland Company has a new management team that has developed an operating plan to improve upon last year’s ROE. The new plan would place the debt ratio at 55%, which will result in interest charges of 7,000 per year. EBIT is projected to be 25,000 on sales of 270,000, it expects to have a total asset turnover ration of 3.0, and the average tax rate will be 40%. What does Roland Company expect its return on equity (ROE) to be following the changes?Steber Packaging Inc. expects sales next year of $40 million. Of this total, 45 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expected to total $17 million. Accelerated depreciation is expected to total $12 million, although the company will only report $8 million of depreciation on its public financial reports. The marginal tax rate for Steber is 34 percent. Current assets now total $26 million and current liabilities total $14 million. Current assets are expected to increase to $29 million over the coming year. Current liabilities are expected to increase to $20 million. Compute the projected after-tax operating cash flow for Steber during the coming year. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ millionSteber Packaging Inc. expects sales next year of $42 million. Of this total, 40 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expected to total $22 million. Accelerated depreciation is expected to total $9 million, although the company will only report $5 million of depreciation on its public financial reports. The marginal tax rate for Steber is 34 percent. Current assets now total $26 million and current liabilities total $14 million. Current assets are expected to increase to $29 million over the coming year. Current liabilities are expected to increase to $17 million. Compute the projected after-tax operating cash flow for Steber during the coming year. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
- Magnum, Inc., projects next year's sales to be $20 million. Current sales are at $15 million, based on current assets of $7 million and fixed assets of $8 million. The firm's net profit margin is 5 percent after taxes. Magnum forecasts that current assets will rise in direct proportion to the increase in sales but that fixed assets will increase by only $150,000. Currently, Magnum has $1.5 million in accounts payable (which vary directly with sales), $7 million in long-term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Magnum plans to pay $500,000 in common stock dividends next year. What are Magnum's total financing needs (that is, total assets) for the coming year?Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount after taxes. The company is currently in the process of projecting its financial needs and has made the following assumptions (projections): - Current Assets will equal 8% of sales, and fixed assets will remain at their current level of $1million. - Common equity is currently $0.6million (made up entirely of Retained earnings), and the company pays out half of its after-tax earnings in dividends. - The company has short-term payables that normally equal 7% of sales each and it has no long-term debt outstanding. What are the company’s financing needs for the coming year?Kelly expects its sales to be $20 million this year under its current credit policy. The present terms are net 30; the days dales outstanding (DSO) is 65 days; and the bad debt loss percentage is 4%. Also, Kelly’s cost of capital is 14%, and its variable costs total 62% of sales. Since Kelly wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. It is predicted that sales would increase by $600,000, and that 55 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 2 percent. (Hint, use incremental approach table) What are the incremental pre-tax profits from this proposal?
- Kelly expects its sales to be $20 million this year under its current credit policy. The present terms are net 30; the days dales outstanding (DSO) is 65 days; and the bad debt loss percentage is 4%. Also, Kelly’s cost of capital is 14%, and its variable costs total 62% of sales. Since Kelly wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. It is predicted that sales would increase by $600,000, and that 55 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 2 percent. (Hint, use incremental approach table) What would be the incremental bad debt losses if the change were made? What would be the incremental cost of carrying receivables if the change were made? What are the incremental pre-tax profits from this proposal?Sambonoza Enterprises projects its sales next year to be $4 million and expects to earn 5 percent of that amount after taxes. The firm is currently in the process of projecting its financing needs and has made the following assumptions (projections): 1. Current assets will equal 20 percent of sales, and fixed assets will remain at their current level of $1 million. 2. Common equity is currently $0.8 million, and the firm pays out half its after-tax earnings in dividends. 3. The firm has short-term payables and trade credit that normally equal 10 percent of sales, and it has no long- term debt outstanding. What are Sambonoza's financing requirements (i.e., total assets) and discretionary financing needs (DFN) for the coming year?Payne Products had $2.4 million in sales revenues in the most recent year and expects sales growth to be 25% this year. Payne would like to determine the effect of various current assets policies on its financial performance. Payne has $2 million of fixed assets and intends to keep its debt ratio at its historical level of 60%. Payne's debt interest rate is currently 10%. You are to evaluate three different current asset policies: (1) a restricted policy in which current assets are 45% of projected sales, (2) a moderate policy with 50% of sales tied up in current assets, and (3) a relaxed policy requiring current assets of 60% of sales. Earnings before interest and taxes are expected to be 14% of sales. Payne's tax rate is 35%, a. What is the expected return on equity under each current asset level? Round your answers to two decimal places. Tight policy % 76.77 Moderate policy Relaxed policy 9.04 5.05 1% b. In this problem, we have assumed that the level of expected sales is…
- (Financial forecasting percent of sales) Tulley Appliances, Inc. projects next year's sales to be $19.9 million. Current sales are at $15.3 million, based on current assets of $5.1 million and fixed assets of $4.9 million. The firm's net profit margin is 5.3 percent after taxes. Tulley forecasts that current assets will rise in direct proportion to the increase in sales, but fixed assets will increase by only $110,000. Currently, Tulley has $1.6 million in accounts payable (which vary directly with sales), $1.9 million in long-term debt (due in 10 years), and common equity (including $3.8 million in retained earnings) totaling $6.3 million. Tulley plans to pay $501,000 in common stock dividends next year. a. What are Tulley's total financing needs (that is, total assets) for the coming year? b. Given the firm's projections and dividend payment plans, what are its discretionary financing needs? c. Based on your projections, and assuming that the $110,000 expansion in fixed assets will…(Financial forecasting—percent of sales) Next year’s sales for Cumberland Mfg. are expected to be $22 million. Current sales are $18 million, based on current assets of $5 million and fixed assets of $5 million. The firm’s net profit margin is 5 percent after taxes. Cumberland estimates that current assets will rise in direct proportion to the increase in sales but that its fixed assets will increase by only $150,000. Currently, Cumberland has $2 million in accounts payable (which vary directly with sales), $1 million in long-term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Cumberland plans to pay $750,000 in common stock dividends next year. Required: What are Cumberland’s total financing needs (that is, total assets) for the coming year? Given the firm’s projections and dividend payment plans, what are its discretionary financing needs? Based on your projections, and assuming that the $150,000 expansion in fixed assets…The Fierro Corporation has annual credit sales of $6 million. Current expenses for the collection department are $100,000, bad debt losses are 4 percent, and the days sales outstanding is 30 days. Fierro is considering easing its collection efforts so that collection expenses will be reduced to $50,000 per year. The change is expected to increase bad debt losses to 7 percent and to increase the days sales outstanding to 45 days. In addition, sales are expected to increase to $8 million per year. Should Fierro relax collection efforts, if the opportunity cost of funds is 10 percent, the variable cost ratio is 75 percent, and its marginal tax rate is 30 percent? All costs associated with production and credit sales are paid on the day of the sale.