Cooper Inc's latest EPS was $4.00, its book value per share
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8. Cooper Inc's latest EPS was $4.00, its book value per share was $20.00, it had 200,000 shares outstanding, and its debt ratio was 40%. How much debt was outstanding?
a- $2,333,333
b- $2,666,667
c- $3,000,000
d- $3,333,333
e- $3,666,667
9. Burger Corp has $500,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $600,000, and its net income after taxes was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would Burger need in order to achieve the 15% ROE, holding everything else constant?
a- 8.00%
b- 9.50%
c- 11.00%
d- 12.50%
e- 14.00%
10. Last year Charter Corp. had sales of $300,000, operating costs of $265,000, and year-end assets of $200,000. The debt-to-total-assets ratio was 25%, the interest rate on the debt was 10%, and the firm's tax rate was 35%. The new CFO wants to see how the ROE would have been affected if the firm had used a 60% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure?
a- 5.01%
b- 5.20%
c- 5.35%
d- 5.57%
e- 5.69%
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Solution Summary
Answer three multiple choice answers ratios and financial statement analysis
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8. Cooper Inc's latest EPS was $4.00, its book value per share was $20.00, it had 200,000 shares outstanding, and its debt ratio was 40%. How much debt was outstanding?
Book Value of Equity=20*200,000=4,000,000
Debt ratio =0.4
Book value of debt =4,000,000/0.6*0.4
b- $2,666,667
9. Burger Corp has $500,000 of assets, and it uses only common ...
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