Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Concept explainers

Macrohedging
Hedging or hedge accounting is a risk-mitigation technique used to protect the current financial position from potential losses. Hedging is often confused with speculating. The major difference between the two is that hedging does not involve guessing, w…
Finance Mathematics
The area of applied mathematics known as mathematical finance, also known as quantitative finance or financial mathematics is concerned with the mathematical modeling of financial markets. The application of mathematical methods to financial problems is …
Question

ZZZ company has $27 million of current assets and $29 million of noncurrent assets. It forecasts an EBIT of $5.2 million and pays income taxes at a 21% rate. Short-term bank notes carry a 4% interest rate, and the company can issue long-term bonds at 7%. The company has set a target debt ratio of 45%.

 

Required:

A. For a maturity mix of 60% current and 40% long-term debt, prepare the company's abbreviated balance sheet.

B. For a maturity mix of 60% current and 40% long-term debt, prepare the company's financial half of its income statement.

C. Based on the financial statements above, calculate the (1) return on equity ratio and the (2) current ratio in order to evaluate the company's risk and return.     

 

I also would love to see the excel formulas please

A Current assets Current liabilities Fixed assets Long-term liabilities Total Assets Total debt Stockholders equity Total Liabilities & Equity В EBIT Interest Earnings before taxes Income tax Net Income Net income Stockholders' equity Return on equity Current assets Current liabilities Current ratio
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Transcribed Image Text:A Current assets Current liabilities Fixed assets Long-term liabilities Total Assets Total debt Stockholders equity Total Liabilities & Equity В EBIT Interest Earnings before taxes Income tax Net Income Net income Stockholders' equity Return on equity Current assets Current liabilities Current ratio
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