The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows:Cash and marketable2,200€Short-term debt€ 76,300securitiesAccounts receivable120,700Accounts payable62,700€ 139,000Inventory125,700€ 248,600Current liabilitiesCurrent assetsProperty, plant, andequipment212,700Long-term debt209,300Deferred taxes45,70088,300Other assetsShareholders' equity247,000Total€ 595,300€ 595,300TotalThe debt has just been refinanced at an interest rate of 4.25% (short term) and 6.25% (long term). The expected rate of return on thecompany's shares is 13.25%. There are 7.53 million shares outstanding, and the shares are trading at €53. The tax rate is 25%.Calculate this company's weighed-average cost of capital. (Do not round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)Weighed-average cost of capital

The firm has three sources of capital:Short term debtLong term debtEquityWe need to estimate the…

Answered: The simplified balance sheet for the…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows: € 76,500 Cash and marketable securities Short-term debt € 2,400 120,900 Accounts payable Accounts receivable 62,900 € 139,400 Current liabilities Inventory 125,900 € 249, 200 Current assets Property, plant, and equipment Deferred taxes 212,900 45,900 88,100 Long-term debt 209,500 Shareholders' equity Other assets 247, 200 € 596,100 € 596,100 Total Total The debt has an interest rate of 3.75% (short term) and 5.75% (long term). The expected rate of return on the company's shares is 12.75%. There are 7.55 million shares outstanding, and the shares are trading at €55. The tax rate is 25%. Assume the company issues €50 million in new equity and uses the proceeds to retire long-term debt. Also assume the company's borrowing rates are unchanged and the short-term debt is permanent. Use the three-step procedure. a. Calculate the cost of equity after the capital restructuring. (Do…
The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows: € 76,600 63,000 € 139,600 Cash and marketable securities Short-term debt Accounts payable Current liabilities € 2,500 121,000 Accounts receivable Inventory 126,000 € 249,500 213,000 46,000 Current assets Property, plant, and equipment Deferred taxes Long-term debt 209,600 Shareholders' equity Other assets 88,000 247,300 € 596,500 € 596,500 Total Total The debt has just been refinanced at an interest rate of 3.50% (short term) and 5.50% (long term). The expected rate of return on the company's shares is 12.50%. There are 7.56 million shares outstanding, and the shares are trading at €56. The tax rate is 25%. Calculate this company's weighed-average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighed-average cost of capital
The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is:Dec. 31, 20Y9 Dec. 31, 20Y8AssetsCash $70,720 $47,940Accounts receivable (net) 207,230 188,190Inventories 298,520 289,850Investments 0 102,000Land 295,800 0Equipment 438,600 358,020Accumulated depreciation—equipment (99,110) (84,320)Total assets $1,211,760 $901,680Liabilities and Stockholders' EquityAccounts payable (merchandise creditors) $205,700 $194,140Accrued expenses payable (operating expenses) 30,600 26,860Dividends payable 25,500 20,400Common stock, $1 par 202,000 102,000Paid-in capital: Excess of issue price over par—common stock 354,000 204,000Retained earnings 393,960 354,280Total liabilities and stockholders' equity $1,211,760 $901,680The income statement for the year ended December 31, 20Y9, is as follows:Sales $2,023,898Cost of goods sold 1,245,476Gross profit $778,422Operating expenses:Depreciation expense $14,790Other operating expenses 517,299Total operating expenses 532,089Operating…
The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows: Cash and marketable securities € 2,700 Short-term debt € 76,800 Accounts receivable 121,200 Accounts payable 63,200 Inventory 126,200 Current liabilities € 140,000 Current assets € 250,100 Property, plant, and equipment 213,200 Long-term debt 209,800 Deferred taxes 46,200 Other assets 87,800 Shareholders' equity 247,500 Total € 597,300 Total € 597,300 The debt has an interest rate of 6.50% (short term) and 8.50% (long term). The expected rate of return on the company's shares is 15.50%. There are 7.58 million shares outstanding, and the shares are trading at €44. The tax rate is 25%. Assume the company issues €50 million in new equity and uses the proceeds to retire long-term debt. Also assume the company's borrowing rates are unchanged and the short-term debt is permanent. Use the…
The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows: Cash and marketable securities € 3,200 Short-term debt € 77,300 Accounts receivable 121,700 Accounts payable 63,700 Inventory 126,700 Current liabilities € 141,000 Current assets € 251,600 Property, plant, and equipment 213,700 Long-term debt 210,300 Deferred taxes 46,700 Other assets 87,300 Shareholders' equity 248,000 Total € 599,300 Total € 599,300 The debt has just been refinanced at an interest rate of 7.75% (short term) and 9.75% (long term). The expected rate of return on the company's shares is 16.75%. There are 7.63 million shares outstanding, and the shares are trading at €39. The tax rate is 25%.Calculate this company's weighed-average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Suppose the following information was taken from the 2022 financial statements of FedEx Corporation, a major global transportation/delivery company. (in millions)20222021Accounts receivable (gross)$ 3,650$ 4,530Accounts receivable (net)3,4004,450Allowance for doubtful accounts25080Sales revenue32,97035,470Total current assets7,1427,304 Answer each of the following questions.(a)Calculate the accounts receivable turnover and the average collection period for 2022 for FedEx. (Round answers to 1 decimal place, e.g. 12.5. Use 365 days for calculation.) Accounts receivable turnoverenter the accounts receivable turnover in times rounded to 1 decimal place timesThe average collection period for 2022enter the average collection period for 2022 in days rounded to 1 decimal place days
Consider this simplified balance sheet for Geomorph Trading: Current assets Long-term assets $ 110 510 Net working capital $ 620 a. Debt-equity ratio b Long-term debt-to-capital ratio C. d. Current ratio a. What is the company's debt-equity ratio? (Round your answer to 2 decimal places.) b. What is the ratio of total long-term debt to total long-term capital? (Round your answer to 2 decimal places.) c. What is its net working capital? d. What is its current ratio? (Round your answer to 2 decimal places.) Current liabilities Long-term debt Other liabilities Equity $ 65 275 80 200 $ 620
The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows: Cash and marketable € 76,600 Short-term debt 2,500 securities 63,000 € 139,600 Accounts receivable 121,000 126,000 Accounts payable Inventory Current liabilities € 249,500 Current assets Property, plant, and equipment 209,600 213,000 Long-term debt 46,000 88,000 Deferred taxes Shareholders' equity 247,300 Other assets € 596,500 € 596,500 Total Total The debt has an interest rate of 3.50% (short term) and 5.50% (long term). The expected rate of return on the company's shares is 12.50%. There are 7.56 million shares outstanding, and the shares are trading at €56. The tax rate is 25%. Assume the company issues 50 million in new equity and uses the proceeds to retire long-term debt. Also assume the company's borrowing rates are unchanged and the short-term debt is permanent. Use the three-step procedure. a. Calculate the cost of equity after the capital restructuring. (Do not…
Cullumber Company has these comparative balance sheet data: CULLUMBER COMPANYBalance SheetsDecember 31 2022 2021 Cash $ 16,350 $ 32,700 Accounts receivable (net) 76,300 65,400 Inventory 65,400 54,500 Plant assets (net) 218,000 196,200 $376,050 $348,800 Accounts payable $ 54,500 $ 65,400 Mortgage payable (15%) 109,000 109,000 Common stock, $10 par 152,600 130,800 Retained earnings 59,950 43,600 $376,050 $348,800 Additional information for 2022: 1. Net income was $34,000. 2. Sales on account were $383,300. Sales returns and allowances amounted to $26,600. 3. Cost of goods sold was $200,600. 4. Net cash provided by operating activities was $59,000. 5. Capital expenditures were $26,400, and cash dividends were $16,500. (d) Inventory turnover. enter inventory turnover in times rounded to 2 decimal places times (e)…
Cullumber Company has these comparative balance sheet data: CULLUMBER COMPANYBalance SheetsDecember 31 2022 2021 Cash $ 16,350 $ 32,700 Accounts receivable (net) 76,300 65,400 Inventory 65,400 54,500 Plant assets (net) 218,000 196,200 $376,050 $348,800 Accounts payable $ 54,500 $ 65,400 Mortgage payable (15%) 109,000 109,000 Common stock, $10 par 152,600 130,800 Retained earnings 59,950 43,600 $376,050 $348,800 Additional information for 2022: 1. Net income was $34,000. 2. Sales on account were $383,300. Sales returns and allowances amounted to $26,600. 3. Cost of goods sold was $200,600. 4. Net cash provided by operating activities was $59,000. 5. Capital expenditures were $26,400, and cash dividends were $16,500. Compute the following ratios at December 31, 2022. (Round current ratio and inventory turnover to 2 decimal…
The latest statement of financial position for Malorie Limited is summarized below: GH¢'000 GHc '000 GH 000 Non-current assets (NBV) 5.700 Current assets Inventory 3.500 Receivables 1.800 5.300 Current liabilities Unsecured payables 4.000 Unsecured Bank overdraft 1.600 5.600 (300) Total assets less current liabilities 5.400 Non-Current Liabilities 10% secured debentures (13.000 Net assets 2,400 Financed by: Stated capital Income Surplus 4.000 (1.600) 2.400 Malorie's stated capital consists of 4.000.000 ordinary shares issued at GHel.00 and fully paid. The non-current assets comprise freehold property with a book value of GH¢3.000.000 and plant and machinery with a book value of GHc2,700,000. The debentures are secured on the freehold property In recent years the company has suffered a series of trading losses which have brought it to the point of liquidation. The directors estimate that in a forced sale the assets will realize the following amounts. GHSFreehold premises Plant and…
Exercise n°6. Consider this simplified balance sheet for Geomorph Trading: Current liabilities Long-term debt Other liabilities Equity Current assets $ 100 $ 60 Long-term assets 500 280 70 190 $ 600 $ 600 a. Calculate the ratio of debt to equity. (Round your answer to 2 decimal places.) b-1. What are Geomorph's net working capital and total long- term capital? b-2. Calculate the ratio of debt to total long-term capital. (Round your answer to 2 decimal places.) Exercise n°7. Magic Flutes has total receivables of $3,000, which represent 20 days' sales. Total assets are $75,000. The firm's operating profit margin is 5%. Assume a 365-day year. 3/4 a. What is the firm's sales-to-assets ratio? (Round your answer to 2 decimal places.) b. What is the firm's return on assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Exercise n°8. a. If a firm's assets of $10,000 represent 200 days' sales, what is its annual sales? Assume a 365-day…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS