QUESTION Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If t 44) Lever Brothers has a debt ratio (debt […]
QUESTION Supply the missing dollar amounts for the income statement for each of the following independent cases. (Hint: In case B, work from the bottom up) Case A Case B Case C Net sales revenue $7,500 $5,500 $6,000 _____________________________ Beginning inventory $11,200 $6,500 $4,000 Purchases $5,000 $8,550 $9,500 ______________________________ Goods available for sale $16,200 $15,050 […]
QUESTION I currently have $7,500 in a money market account paying 5.65 percent annually. I plan to use this and my savings over the next four years to buy a car at the end of this year. The car will cost $12,000 in four years. How much should I invest in the money market account […]
QUESTION Identify each as increasing (+) or decreasing (-) cash flows fom operating activities, investment activities or financing activities.Decrease in inventoryNet income from operationsPayment of dividendsSale of Preferred stockIncrease in accrued expensesPurchase of new equipmentDecrease in depreciation Increasing ( ) Decrease in inventory Net income from operations Sale of Preferred stock Increase in Accounts Payable […]
QUESTION You have just won the state lottery and have two choices for collecting your winning. You can collect $50,000 today or receive $10,100 per year for the next seven years. A financial analysts has told you that you can earn 10% on your investments. Which alternative should you select and why? Solution: Option 1: […]
QUESTION Distinguish between the money and capital markets. Basically the difference between the capital markets and money markets is that capital markets are for long term investments, companies are selling stocks and bonds in order to borrow money from their investors to improve their company or to purchase assets. Whereas money markets are more of […]
QUESTION conduct the analysis and calculate payback period for each option, IRR of each option and NPV for each option at three WACC points of 12%, 14% and 16% Option A: Repair the machine Year Cash flow 0 -50,000 1 15,500 2 20,100 3 18,900 4 17,100 5 13.700 Option B: Buy a new machine […]
QUESTION Bin Restaurant Corp preferred stock has a market price of $14.50. If it has a yearly dividend of $3.50, what is your expected rate of return if you purchase the stock at its market price?Answer41.43%19.45%22.36%24.14% According to the given information,Annual dividend for preferred stock = $3.50Market price of preferred stock = $14.50The formula for […]
QUESTION For a typical corporation, which of the following capital structures will result in the lowest weighted average cost of capital?Answer40% debt, 20% preferred stock, 40% common equity50% debt, 10% preferred stock, 40% common equity60% debt, 10% preferred stock, 30% common equity60% debt, 15% preferre Let us assume for example,Cost of debt (Kd) = 8%Cost […]
QUESTION 11. Companies E and P each reported the same earnings per share (EPS), but Company Es stock trades at a higher price. Which of the following statements is CORRECT?A) Company E probably has fewer growth opportunities.B) Company E is probably judged by investors to be riskier.C) Company E must 11. EPS = Earnings avalible […]
