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    Finance case

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    I need question 1 and 2 answered. See the case attached.

    Questions:

    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.

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    https://brainmass.com/business/finance/finance-case-208512

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    Questions:

    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:

    Sales 16,500,000
    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 ...

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    Finance case is discussed in great detail in this solution.

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