I need question 1 and 2 answered. See the case attached.
1. If Symonds Electronics Inc. were to raise all of the required capital by issuing debt, what would
the impact be on the firm's shareholders?
2. What does "homemade leverage" mean? Using the data in the case explain how a shareholder
might be able to use homemade leverage to create the same payoffs as achieved by the firm.
1. If Symonds Electronics Inc. was to raise all of the required capital by issuing debt, what would the impact be on the firm's shareholders?
If Symonds Electronics Inc were to raise all the required capital by issuing debt the impact on the firm's shareholders would different with different levels of revenue raised. In finance it is advisable to consider the most conservative estimate. It is estimated that the revenue of Symonds may increase anywhere between 10% and 50%. If we consider the most conservative estimate of an increase in revenue by 10% we can reconstruct the Income Statement provided by Andrews as follows:
Cost of Goods Sold 11,550,000
Gross Profits 4,950,000
Selling & Admin. Exp. 825,000
Depreciation 1, 650,000
Earnings Before I &T 2,475,000
Interest (10%) 500,000
Earnings Before Taxes 1,975,000
Taxes (40%) 790,000
Net Income 1, 185,000
Decrease in ...
Finance case is discussed in great detail in this solution.
Product Costing: Case Study Farm Financial Standards Case Study
Farm Financial Standards Council Model Case
If the Farm Council Case did not use Activity Based Costing, identify several dysfunctional decisions that could be made using traditional cost allocation.
Which solution do you prefer, the initial or alternative solution proposed in the case?
Explain the difference between the suggested solution and alternative solution.
Read this article:Throw Out Fixed and Variable Cost Thinking Bring In Activity-Based Costing for Distribution Decisions, Discuss the assertions this author is making in terms of variable and fixed costing and why ABC may make more sense in these type of settings. Justify your answer with good reasoning. You should attempt to integrate the thoughts of this article and your critique of it with the comments you make above.View Full Posting Details