The Blunt Trucking Company needs to expand its fleet by 40 percent to meet the demands of two major contracts it just received to transport military equipment from manufacturing facilities scattered across the United States to various military bases. The cost of the expansion is estimated to be $10 million. Blunt maintains a 30 percent debt ratio and pays out 50 percent of its earnings in common stock dividends each year. a. If Blunt earns S4 million in 2015, how much common stock will the firm need to sell in order to maintain its target capital structure? b. If Blunt wants to avoid selling any new stock but wants to maintain a constant dividend payout percentage of 50 percent, how much can the firm spend on new capital expenditures?
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: Verizon Communications said it plans to spend $22.9 billion to expand its fiber-optic Internet and…
A: F=PF/P i, n P=CustomersAverage IncomeP/A i, n+CustomersAverage IncomeCustomer baseP/G i,…
Q: Conrad Corporation plans to raise $8 million to pay off its existing short-term bank loan of $2.4…
A: Money to be raised : $8 million Debt repayment : $2.4 million Assets purchase : $5.6 million…
Q: Lux Co. recently reported sales of P100 million, and net income equal to P5 million. The company…
A: Answer - Additional funds needed (AFN )is a financial concept used when a business looks to expand…
Q: Bulldogs Inc. expects earnings before interest and taxes of P2,500,000 for the coming year. The…
A: With the help of the given figures we will prepare the below table for finding out the Dividend.
Q: on stock. The firm
A: Given: Bonakid Decided to invest= P10,000,000 The firm currently= P50,000,000 shares…
Q: Downtown Partners is considering an investment of $500,000 in an early stage company, Newco.…
A: The required rate of return means the least profit an investor expects to collect from the…
Q: Tartan Industries currently has total capital equal to $4 million, haszero debt, is in the 40%…
A: Calculation of Current Price per share and Current Price per share after recapitalization: Excel…
Q: Dahlia Colby, CFO of Charming Florist Ltd., has created the firm’s pro forma balance sheet for the…
A: Proforma balance sheet is the estimated or projected balance sheet for future period of time.
Q: how much cash should Buccaneer raise from selling securities each week to minimize its costs of…
A: Economic Order cash is the cash quantity hat should maintain by the entity in order to minimize the…
Q: The karson transport company currently has net operating income of $508,000 and pays interest…
A: times interest earned = net operating income/interest expense
Q: Trower Corp. has a debt−equity ratio of .80. The company is considering a new plant that will cost…
A: Calculation of Initial Cash Flow:Excel Spreadsheet:
Q: Mudvayne, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with…
A: Face value =$100 Coupon payment =8% semiannual Price =107 Years to MATURITY =18 years =36…
Q: The Podrasky Corporation is considering a $250 million expansion (capital expenditure) program next…
A: Solution: Introduction: A cash flow statement is one of the financial statements of a business…
Q: Vanderheiden Press Inc. and Herrenhouse PublishingCompany had the following balance sheets as of…
A: The Vanderheiden Press Inc. and Herrenhouse Publishing with the balance sheets as of December 31,…
Q: The Danville Company is considering a $50 million expansion (capital expenditure) program next year.…
A: Solution:- Calculation of approximately how much additional financing will be needed if the…
Q: Bulldogs Inc. expects earnings before interest and taxes of P2,500,000 for the coming year. The…
A: Tax rate is 25% To Find: Dividend payout ratio
Q: Tong foong Co. Ltd has decided that its capital budget during the coming year will be $20 million…
A: Given in the question that, The company has $200,000,000 of assets The optimal capital structure is…
Q: Machina Corporation is financing an ongoing construction project. The firm needs $8 million of new…
A:
Q: The White Corporation makes small Bozo replicas for sale in the growing Austin market. The firm's…
A: a) Maximum of preferred stock = $ 20 million, which has 10% share Therefore, Size of preferred stock…
Q: National Co. recently reported sales of P100 million, and net income equal to P5 million. The…
A: AFN is a tool for determining how much money a company will require in the future. This strategy…
Q: The company wants to take a $500.0 mil loan to rebuild its position and expand its line of business…
A: If the company considers taking a long-term debt for restructuring and expansion of its operations,…
Q: Mullen Group is considering adding another division that requires a cash outlay of $30,000 and is…
A: The Net Present Value is a financial analysis technique for assessing the profitability of an…
Q: Andre is the CEO of soccer solutions in 2025, the firm will sell 6,324,500 whistles at a selling…
A: Given: Operating cash flows are free cash flows available for the company to use for a capital…
Q: Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and…
A: Given:
Q: artan Industries currently has total capital equal to $4 million, has zero debt, is in the 40%…
A: The question can be computed as follows:
Q: Lente, a manufacturer of energy-efficient lighting solutions, has had such success with its new…
A:
Q: onrad Corporation plans to raise $8 million to pay off its existing short-term bank loan of $2.4…
A: Debt Ratio is the ratio of total debt to total assets. in the balance sheet. Let us look at balance…
Q: Ace Corporation is considering expanding its operations. If it expands, its current accounts are…
A: Change in working capital is difference between current assets and current laibilties.
Q: Coastal Carolina Heating and Cooling Inc. has a 6-monthbacklog of orders for its patented solar…
A: Formula to calculate the required external equity is: Total required equity - Retained earnings…
Q: ardial GreenLights, a manufacturer of energy-efficient lighting solutions, has had such success with…
A: In finance external equity refers to the funds that a company has to obtain from outside the company…
Q: The vice president of operations at Dintell Corporation, a majorsupplier of passenger-side…
A: 1) Net expected present value can be found out by getting expected sales from the expected market…
Q: Buena Terra Corporation is reviewing its capital budget for the upcoming year. It has paid a $3.00…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: The Blunt Trucking Company needs to expand its fleet by 40 percent to meet the demands of two major…
A: The expansionary cost for any project or business is sourced by debt and equity in a proportion in…
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: Jupiter Inc.’s directors are considering expanding their operations in foreign markets. They…
A: NPV computes the existing value of future benefits by discounting future worth with a stated…
Q: Buena Terra Corporation is reviewing its capital budget for the upcoming year. It has paid a $3.00…
A: Note: I am suppose to give solution of 1 three sub parts. Please repost the question with remaining…
Q: Machina Corporation is financing an ongoing construction project. The firm needs $8 million of new…
A: Requirement for new capital can be met either through debt or equity or a combination of both.…
Q: Gardial GreenLights, a manufacturer of energy-efficient lighting solutions,has had such success with…
A: The fund that a company raises by issuing equity shares for the business operations is term as…
Q: The Podrasky Corporation is considering a $250 million expansion (capital expenditure) program next…
A: There are two sources from which a company can obtain the required amount. The first source is the…
Q: Bulldogs Inc. expects earnings before interest and taxes of P2,500,000 for the coming year. The…
A: Residual Dividend Policy is the policy in which the earnings of the company are first used for the…
Q: Dahlia Colby, CFO of Charming Florist Ltd., has created the firm's pro forma balance sheet for the…
A: The next year's sales are $330 million which has grown by 20 percent. So, the current year's sales…
Q: Phil plc and Costas plc are identical firms except that Costas is more levered. Both companies will…
A: Market value of a firm is determined by multiplying the outstanding shares issued by the company by…
Q: 3. Margetis Inc. carries an average inventory of $750,000. Is annual sales are S10 million, its cost…
A: Cash conversion cycle (CCC) is the number of days a firm takes to purchase inventory and convert…
Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…
A: Earnings per share of the company means how much a single equity share of the company is earning…
Q: Hebner Housing Corporation has forecast the following numbers for this upcoming year: Sales =…
A: Income statement or statement of profit or loss helps investors to get to known about the total…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
- Suppose that Rose Industries is considering the acquisition of another firm in its industry for $137 million. The acquisition is expected to increase Rose's free cash flow by $5 million the first year, and this contribution is expected to grow at a rate of 4% every year thereafter. Rose currently maintains a debt to equity ratio of 1, its corporate tax rate is 21%, its cost of debt rD is 6%, and its cost of equity rE is 10%. Rose Industries will maintain a constant debt-equity ratio for the acquisition. The Free Cash Flow to Equity (FCFE) for the acquisition in year O is closest to ($ Million) (2 decimal places):Suppose that Portsea Inc. is thinking about acquiring a firm in its industry for $150 million. The acquisition is expected to increase Portsea's free cash flow by $20 million in the first year, and this contribution is expected to grow at a rate of 3% every year thereafter. Assume that Portsea currently maintains a debt-to-equity ratio of 0.80, its corporate tax rate is 30%, its cost of debt is 4%, and its cost of equity is 14% . Further assume that Portsea will maintain a constant debt - equity ratio for the acquisition. What is the free cash flow to equity (FCFE) for the acquisition in year 0 ?Power Development Incorporation is expecting earnings before interest and taxes of P2 million for the next year. The cost of equity is 15%. The company has a long-term debt of P5,000,000 on which the firm pays 10%. One million ordinary shares are outstanding. The firm’s capital structure is funded by 40% debt and 60% equity. The applicable tax rate is 40%. Next year Power Development Inc. expects to fun its positive net present value project costing P1.2 million, on which the funding will be the same as the firm’s capital structure. Assume also that any new debt will also have an interest rate of 10%. The firm will follow a residual dividend model and no other projects will be funded next year. How much of the income will be declared as dividend? What is the retention ratio?
- Power Development Incorporation is expecting earnings before interest and taxes of P2 million for the next year. The cost of equity is 15%. The company has a long-term debt of P5,000,000 on which the firm pays 10%. One million ordinary shares are outstanding. The firm’s capital structure is funded by 40% debt and 60% equity. The applicable tax rate is 40%. Next year Power Development Inc. expects to fun its positive net present value project costing P1.2 million, on which the funding will be the same as the firm’s capital structure. Assume also that any new debt will also have an interest rate of 10%. The firm will follow a residual dividend model and no other projects will be funded next year. How much is earnings before taxes? How much of the project is funded by debt?Power Development Incorporation is expecting earnings before interest and taxes of P2 million for the next year. The cost of equity is 15%. The company has a long-term debt of P5,000,000 on which the firm pays 10%. One million ordinary shares are outstanding. The firm’s capital structure is funded by 40% debt and 60% equity. The applicable tax rate is 40%. Next year Power Development Inc. expects to fun its positive net present value project costing P1.2 million, on which the funding will be the same as the firm’s capital structure. Assume also that any new debt will also have an interest rate of 10%. The firm will follow a residual dividend model and no other projects will be funded next year.1. How much of the income will be declared as dividend?2. What is the retention ratio? In percentage, put percentage signSuppose today is January 1, 2022. You wish to value the shares of Terrapin Industries, a private firm with 100 million outstanding shares, $300M in debt, and $25M in excess cash. The company has a tax rate of 30%. You expect the company’s Sales to equal $300 million in 2022, and to grow at 10% per year through 2025. The company’s EBIT margin (i.e., EBIT as a % of sales) is expected to be 10%, while Net Working Capital is expected to equal 20% of (same year) sales. The balance sheet amount of Net Working Capital at the end of 2021 was $55 million. You expect that the company’s Net PP&E will remain constant from now through 2025 (i.e., capital expenditures will equal depreciation each year). After 2025, free cash flows are projected to grow at a constant 2% rate forever. You expect Terrapin to maintain a 50% D/V ratio in the future. Given this, you have estimated the beta of Terrapin’s equity (Be) at 1.1 and the beta of its debt (Bd) at 0.3. The current long-term risk-free rate is…
- Nike has sales of 36 billion in 2019. Suppose you expect its sales to grow at a rate of 5% forever. Based on Nike's past profitability and investment needs, you expect EBIT to be 7% of sales, increases in net working capital requirements to be 12% of any increase in sales, and capital expenditures to equal depreciation expenses. Nike pays 20% income tax. The opportunity cost of capital is 7%. Nike has 0.9 billion shares outstanding, 3.3 billion in cash, 1.2 billion in debt. Calculate the share price for 2020 using the discounted free cash flow model. Round your final answer to one decimalMatt’s Manufacturing, Inc. expects to earn $45 million per year in perpetuity if it does not undertake any new projects. However, the firm has an investment opportunity that will generate annual earnings of $10 million in perpetuity, beginning two years from today. This investment has an initial (upfront) cost of $10 million today and $5 million next year. The firm has 10 million shares of common stock outstanding, and the required rate of return on the stock is 10% percent. What is the stock price per share if the firm undertakes the investment?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?
- GUESS store wishes to assess the value of its ladyline division. This division has N$300000 preferred stock and other debt with a market value of N$8,500,000. Its weighted average cost of capital is 15%. The Active Shoe Division's estimated free cash flow each year from 2018 through 2021 is given in the following table. Beyond 2021 to infinity, the firm expects its free cashflow to grow at 2% annually. " Table 2 Cash flows of Guess store N$'Free cash flow Year (t) (FCFt) 2018 2019 2020 2021 $600,000 1,200,000 1,600,000 2,000,000 14.1 Use cash flow model to estimate the value of Guess stores entire ladyline division? 14.2 Use your finding in section 14.1 along with the data provided above to find this division's common stock value. 122113-9. (Constant dividend payout ratio policy) The Daher Trucking Company needs to expand its fleet by 20 percent to meet the demands of two major contracts it just received to transport aeronautic equipment from manufacturing facilities scattered across Europe to its various assembly sites in France and Germany. The cost of the expansion is estimated to be €10 million, Daher maintains á 50 percent debt ratio and pays out 30 percent of its earnings in common stock dividends each year. a. If Daher earns €4 million in 2015, how much common stock will the firm need to sell in order to maintain its target capital structure and its constant dividend payout ratio policy? b. If Daher wants to avoid selling any new stock but wants to maintain a constant dividend payout percentage of 30 percent, how much can the firm spend on new capital expenditures?A company is planning the financing of a major expansion. It will use common stock to fund this expansion. The company currently has 300,000 shares outstanding selling at an average of $130 per share. It would sell an additional 50,000 shares to bring in an estimated $5 million. The new project is expected to raise EBIT by 18% when implemented. The company’s capital structure contains long-term debt of $10 million which pays interest of 11%. Current Income Statement Net Sales 66,000,000 COGS 42,000,000 Gross Profits 24,000,000 S and A Expenses 9,300,000 Operating Profits 14,700,000 Interest on Debt 1,100,000 EBT 13,600,000 Taxes at 34% 4,600,000 EAT 9,000,000 Develop an analysis of EPS and show the effect of any dilution of earnings. Develop the same analysis for an alternative issue of $5 million of 10% preferred stock, and an alternative issue of $5 million of 9% debt. Develop specific comparative costs of all…