The Anderson Corporation (an all-equity-financed firm) has a sales level of $300,000 with a 12 percent profit margin before interest and taxes. To generate this sales volume, the firm maintains a fixed-asset investment of $150,000. Currently, the firm maintains $50,000 in current assets. a) Determine the total asset turnover for the firm and compute the rate of return on total assets before taxes. b) Compute the before-tax rate of return on assets at different levels of current assets starting with $10,000 and increasing in $15,000 increments to $100,000. c) If the new current assets were financed with long-term debt at 15 percent interest, what would be the before-tax interest "cost" if the new current assets added equals $40,000?
Q: Lany Corporation is deciding whether to pursue a restricted or relaxed working capital investment…
A: The Fixed Assets Turnover Ratio is Activity Ratio. It is calculated with the help of following…
Q: F Enterprises is evaluating whether to do a either a restricted or relaxed investment policy on…
A: The Return on Equity is calculated with the help of following formula Return on Equity = Net Income…
Q: O Perseverance Corporation is deciding whether to pursue a restricted or relaxed current asset…
A: Return on equity = Net income/equity Roe under restricted policy is 6.5℅ and under relaxed policy…
Q: Edmonds Industries is forecasting the following income statement: Sales $11,000,000 Operating…
A: The income statement is a company's financial statement that shows the firm's operating revenue and…
Q: 5. LSP. Co recently reported $11,750 of sales, $5,500 of operating costs other than depreciation,…
A: Free Cash Flow- Free cash flow (FCF) is a measure of how much money a company makes after paying for…
Q: Last year, Sharpe Radios had net operating profit after-taxes (NOPAT) of $7.8 million. Its EBITDA…
A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…
Q: Last year, Jackson Tires reported net sales of $40,000,000 and total operating costs (including…
A: Net sales = $40,000,000 Total operating costs = $26,000,000 Net profit before tax = Net sales-Total…
Q: Ben Corporation is deciding whether to pursue a restricted or relaxed working capital investment…
A: Times Interest Earned ratio is a measure of a company abilitybto meet out its debt (Interest…
Q: Sherlock Homes, a manufacturer of low-cost mobile housing, has $5,150,000 in assets. Temporary…
A: Given Information Total Assets = $5,150,000 Temporary Current Assets = $1,130,000 Permanent Current…
Q: The Grey Corporation has $12 billion in assets, and its tax rate is 40%. The company’s basic…
A: Basic earning power(BEP)= Earnings Before Interest & Taxes(EBIT) / Total Assets 15%= EBIT /…
Q: Marco's has current annual sales of $52,600, net fixed assets of $38,900, and total assets of…
A: Given the following information: Annual sales: $52,600 Net fixed assets: $38,900 Total assets:…
Q: Fast Securities Ltd is looking into an investment of $100,000. The investment is expected to…
A: Economic value added (EVA) is a measure of a company's financial performance based on the residual…
Q: AT&T recently reported (in millions) $8,250 of sales, $5,750 of operating costs other than…
A: Given data; sales= $ 8250 operating cost = $ 5750 depreciation = $ 1100 value of bond = $3200…
Q: Mason Corporation had $1,182,000 in invested assets, sales of $1,298,000, operating income amounting…
A: Investment turnover: This ratio gauges the operating efficiency by quantifying the amount of sales…
Q: JohnBoy Industries has a cash balance of $45,000, accounts payable of $125,000, inventory of…
A: Working capital is the amount of funds required for the managing daily operating activities of the…
Q: The Klaven Corporation has operating income (EBIT) of $750,000. The company’s depreciation expense…
A: The question is based on the calculation of net income , cash flow and operating cash flow. Net…
Q: watson is a division of Bolin Products, Inc. During the most recent year, Watson had a net income of…
A: The funds invested in the firm by its owners, debt holders, and lenders during the course of 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: . How would each of these plans affect earnings per share? Consider the current plan and the two new…
A: Answer a:
Q: e is 30%. If the company follows a restricted policy, its total asset turnover will be 2.4. Under
A: Given as, The Fixed Assets Turnover Ratio is Activity Ratio. Fixed Assets Turnover Ratio as, =…
Q: average net profits expected in future by Khalifa and Co. are OMR 30,000 per year. The average…
A: 1) super profit method = super profit* number of year purchased Super profit= (actual average…
Q: Colter Steel has $4,200,000 in assets. Temporary current assets.........................…
A: Introduction EBIT EBIT stands for earnings before interest and taxes and is a measure of a company's…
Q: PBB Company has a net operating income of $15 million. Further, the company has $100 million of debt…
A: Value of a company is summation of value of equity and value of debt where value of equity can be…
Q: A company has annual after-tax operating cash flows of P2,000,000 per year which are expected to…
A: After-tax operating cash flows = P 2,000,000 After tax WACC = 8%
Q: Medallion Cooling Systems, has total assets of $10,900,000, EBIT of $1,990,000, and preferred…
A: The earnings per share ratio are used to measure a company's profitability. It shows the amount of…
Q: Compute the projected after-tax operating cash flow for Steber during the coming year.
A: Operating Cash Flow: These are cash flows of the firm generated from the normal operations. These…
Q: LANY Corporation is deciding whether to pursue a restricted or relaxed working capital investment…
A: The Fixed Assets Turnover Ratio is Activity Ratio. It is calculated with the help of following…
Q: National Co. is considering whether to pursue a restricted or relaxed current asset investment…
A: Annual sales (S) = P 400000 Fixed assets = P 150000 Debt = Equity = 50% of assets EBIT = P 36000 r =…
Q: You are considering an investment in WEST Corporation and want to evaluate the firm's cash flow.…
A: Given, EBIT = P62 million Tax paid = P17 million Depreciation = P5 million Increase in fixed assets…
Q: Edmonds Industries is forecasting the following income statement: Sales $10,000,000 Operating costs…
A: Before that, the calculations are as follows - New operating costs (excluding depreciation and…
Q: National Co. is considering whether to pursue a restricted or relaxed current asset investment…
A: Return on Equity measures the profitability of equity funds invested in the firm. This ratio…
Q: Blaser Corporation had $1,098,000 in invested assets, sales of $1,243,000, operating income…
A: Return on investment is a measure used to measure how much profits we are earning on a particular…
Q: Mason Corporation had $1,027,000 in invested assets, sales of $1,215,000, operating income amounting…
A: Investment turnover: The investment turnover ratio compares the revenues produced by a business to…
Q: Dollar Inc. recently reported operating income (EBIT) of $3.25 million, depreciation of $0.56…
A: Free cash flow are the cash available with the company. The free cash flows helps in reducing the…
Q: The Glexon mill has total assets of $91,600, current liabilities of $9,700, dividends paid of…
A: Particulars Total Assets (A) $ 91,600 Current liabilities (L) $ 9,700 Sales (S0) $ 38,400…
Q: Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25…
A: Rate of return on assets is the rate which denotes the return which is earned on the assets of the…
Q: 1. Gert. Co recently reported $10,750 of sales, $5,500 of operating costs other than depreciation,…
A: Based on the the given data we will calculate the cash flow,
Q: The following is Firm Y's current statement of comprehensive income. If the firm is currently…
A: The question is multiple choice question Required Choose the Correct Option.
Q: Steber Packaging, Inc., expects sales next year of $50 million. Of this total, 40 percent is…
A: Operating expenses=$25millionAccelerated Depreciation=10millionMarginal tax rate=34%
Q: NoGrowth Incorporated had operating income before interest and taxes in 2002 of $220 million. The…
A: Value of share is depends upon profit earn by the company. Is can be simple calculated by…
Q: Southern Timber Company expects to have an EBIT of $10 million in the coming year, and its EBIT is…
A: According to M&M Model the value of levered firm will be sum of value of unlevered firm plus tax…
Q: For the period just ended, Trek Corporation's Trailer Division reported profit of $54 million and…
A: Return on investment (ROI) = Operating income / Invested capital Residual income = Operating income…
Q: An investment centre has reported net operating profits after tax of sh.24 million. Taxation is paid…
A: Economic value added (EVA) is used to know the true economic value of company. It is calculated…
Q: LANY Corporation is deciding whether to pursue a restricted or relaxed working capital investment…
A: The Fixed Assets Turnover Ratio is Activity Ratio. It is calculated with the help of following…
Q: Lux Co. is considering whether to pursue a restricted or relaxed current asset investment policy.…
A: Return on Equity measures the profitability of equity funds invested in the firm. This ratio…
Q: Blaser Corporation had $1,090,000 in invested assets, sales of $1,277,000, operating income…
A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…
Q: whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales…
A: asset turn over ratio is calculated by taking net sales in the numerator and taking total assets in…
Step by step
Solved in 2 steps with 4 images
- Fast Securities Ltd is looking into an investment of $100,000. The investment is expected to generate a net operating profit after tax (NOPAT) of $20,000. Given the firm’s weighted average cost of capital of 10% and tax rate of 20%, calculate the economic value added (EVA) of the investment. Should the firm accept or reject the investment? Give your reason(s).Perseverance Corporation is deciding whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total P3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is P150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2. What's the difference in the projected ROES under the restricted and relaxed policies? [Round off to one decimal place.)F Enterprises is evaluating whether to do a either a restricted or relaxed investment policy on current assets. The sales of F Enterprises for the year is P400,000 while fixed assets are P100,000. Debt represents half of the firm’s assets. The firm’s debt has an interest rate of 10%. The EBIT of F Enterprises is P36,000. The entity is subject to income tax rate of 40%. Using a restricted policy, current assets will account for 15% of sales while the relaxed policy will increase share of current assets to 25 percent of sales. What will be the variance between projected return on equity between restricted and the relaxed investment policy on current assets?
- A firm has an average investment of $20,000 during the year. During the same period, the firm generates an after-tax income of $5,000. The cost of capital is 20 percent. Required: a) Calculate the economic value added (EVA) for the firm. b) Calculate the net return on the investment (ROI) for the firm.Hardwig Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2. Refer to the data for Hardwig, Inc.Assume now that the company believes that if it adopts a restricted policy, its sales will fall by 15% and EBIT will fall by 10%, but its total assets turnover, debt ratio, interest rate, and tax rate will all remain the same. In this situation, what's the difference between the projected ROEs under the restricted and relaxed policies?Planet Express has liabilities of $400 and assets of $1000. The average YTM on its debt is 10% and the tax rate is 20%. The company has announced $1 annual dividends in perpetuity and has a stock price of $5. What is the company’s weighted average cost of capital (WACC)? Why is the tax rate included in the WACC? How can the WACC be used to evaluate potential investments?
- Medallion Cooling Systems, has total assets of $10,900,000, EBIT of $1,990,000, and preferred dividends of $205,000and is taxed at a rate of 40%.In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment: Capital structure debt ratio Cost of debt, rd Number of common stock shares Required return, rs 0% 0% 198,000 12.1% 15 7.9 171,000 13.2 30 8.9 141,000 13.8 45 12.1 107,000 16.1 60 14.9 76,000 20.1 a. Calculate earnings per share for each level of indebtedness. Debt Ratio 0% EBIT $ 1,990,000 Less: Interest $ EBT $ Taxes @40% $ Net profit $ Less: Preferreddividends $ Profits available to common stockholders $…The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Calculate the firm's initial net working capital. Calculate the firm's initial ratio of current assets to total assets. Critically evaluate THREE (3) advantages of commercial paper that usually used by the largest and most credit-worthy companies.Lany Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm’s annual sales are expected to total 2,400,000 its fixed asset turnover ratio equals 3.0, and its debt and common equity are each 50% of the total asset which is composed of fixed and current assets. EBIT is 130,000, the interest rate of the firm’s debt is 8%, and the tax rate is 30%. If the company follows a restricted policy, its total asset turnover will be 2.4. Under a relaxed policy its total asset turnover will be 2.0. How much would be the current assets under relaxed policy? Refer to the previous item, what is the projected ROE under the restricted policy? Use 2 decimal places for your final answer Refer to the previous item, what is the TIE ratio under the related policy? Use 2 decimal places for your final answer.
- Lany Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm’s annual sales are expected to total 2,400,000 its fixed asset turnover ratio equals 3.0, and its debt and common equity are each 50% of the total asset which is composed of fixed and current assets. EBIT is 130,000, the interest rate of the firm’s debt is 8%, and the tax rate is 30%. If the company follows a restricted policy, its total asset turnover will be 2.4. Under a relaxed policy its total asset turnover will be 2.0. How much would be the current assets under relaxed policy?es Edsel Research Labs has $26.40 million in assets. Currently half of these assets are financed with long-term debt at 6 percent and ha with common stock having a par value of $10. Ms. Edsel, the Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 8 percent. The tax rate is 30 percent. Under Plan D, a $6.60 million long-term bond would be sold at an interest rate of 8 percent and 660,000 shares of stock would be purchased in the market at $10 per share and retired. Under Plan E, 660,000 shares of stock would be sold at $10 per share and the $6,600,000 in proceeds would be used to reduce long-term debt. a-1. Compute earnings per share considering the current plan and the two new plans. Note: Round your answers to 2 decimal places. Current Plan D Plan E Earnings per Share $ $ $ 0.42 0.20 1.26 a-2. Which plan(s) would produce the highest EPS? Note that…Ben Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm's annual sales are expected to total $2,400,000, its fixed assets turnover ratio equals 3.0, and its debt and common equity are each 50% of total assets which is composed of fixed and current assets. EBIT is $130,000, the interest rate on the firm's debt is 8%, and the tax rate is 30%. If the company follows a restricted policy, its total assets turnover will be 2.4. Under a relaxed policy its total assets turnover will be 2.0. a. What is the projected ROE under the relaxed policy? b. TIE ratio under relaxed policy