A firm has a WACC of 12%, $500,000 in 9% debt, $800,000 in equity. Both debt and equity are shown at market values, and the firm pays no taxes. Recall with no taxes that the expected return on assets equals the WACC. Determine the expected return on equity.
a. Manufactured Earnings is a â??darlingâ? of Wall Street analysts. Its current market price is $15 per share, and its book value is $5 per share. Analysts forecast that the firm's book value will grow by 10 percent per year indefinitely, and the cost of equity is 15 percent. Given these facts, what is the market's expectat
Discuss how a company decides on its debt versus equity structure. If you do not have an example from work, provide an example from your personal experiences (such as a company you have invested in or even how a family can make this decision for an individual household.)
The annual reports of the Coca-Cola Co. and PepsiCo, Inc.m, indicate the following for the year ended December 31, 2008 (amounts in millions): Coca-Cola Co. PepsiCo., Inc. Net revenues $31,994 $43,251 Net income
Which company would you expect to have the higher debt to equity ratio, a financial institution or a high technology company? Why? Which company would you expect to have a higher profit margin, an appliance manufacturer or a grocer? Why? Which company would you expect to have a higher price to earnings ratio, General Motor
Please see attachment for detailed info on 2 questions (in better format): The DuPont Analysis method is based on a series of relationships among financial ratios: Net Profit Margin x Total Asset Turnover = Return on Assets and Net Profit Margin x Total Asset Turnover x Leverage Ratio = Return on Equity Using data from
If a private equity investment loses an average of 15% for each of its first 3 years, what average annual return must it achieve over the next 10 years in order to provide its owners a 20% annual return over the 13 year period?
Presented below are the comparative balance sheets of Big Apple, Inc., at December 31, 2009, and 2008. Sales for the year ended December 31, 2009, totaled $890,000. Assets 2009 2008 Cash $45,000 $49,000 Account receivable 134,000 106,000 Merchandis
Changes in Stockholders Equity The stockholders' equity section Winslow Design Company's 12-31, 2009 balance sheet as appeared as follows: Contributed capital Preferred stock-$100 par (10,000 shares authorized, 1250 shares issued) 125,000 Additional paid in capital on p
Last year: Sales = $200,000 Assets = $125,000 Profit Margin = 5.15% Equity Multiplier = 1.85 Assets will be reduced by $25,000 without affecting sales or costs. How much would the ROE change with this asset reduction?
Effect of adding debt to balance sheet on ROA versus ROE. Why does ROE vary more widely when company acquires debt. Total assets $100,000, net income $10,000 compared to 50% equity financed firm with same income and 5% cost of debt.
1. A firm has a profit margin of 2% and an equity multiplier of 2.0. Its sales are$100 million and it has total assets of $50 million. What is its ROE? 2. Ebersoll mining has $6 million in sales; its ROE is 12%; and its total assetsturnover is 3.2x. The company is 50% equity financed. What is its net income?
Last year Ann Arbor Corp had $160,000 of assets, $305,000 of sales, $20,000 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost
Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-assets ratio was 37.5%. Based on the DuPont equation, what was the ROE?
Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets of $420,000. The debt-to-total-assets ratio was 17%, the interest rate on the debt was 7.5%, 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 50% debt ratio. Assume th
Last year Kruse Corp had $275,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $252,500. Sales, costs, and net income would not be affected, and the
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $320,000 and its net income was $10,600. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $10,250 without changing its sales, assets, or capital struc
Quigley Inc. is considering two financial plans for the coming year. Management expects sales to be $300,000, operating costs to be $265,000, assets to be $200,000, and its tax rate to be 35%. Under Plan A it would use 25% debt and 75% common equity. The interest rate on the debt would be 8.8%, but under a contract with existing
Last year Kruse Corp had $355,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $252,500. Sales, costs, and net income would not be affected, and the
Company has the following characteristics: Sales $1,000 Total Assets $1,000 Total Debt/Total Assets 35% EBIT $200 Tax Rate 40% Interest Rate on Total Debt 4.57% What is their ROE?
I have a problem finding out about the ROE in this problem. The following characteristics: Sales $1,000 Total Assets $1,000 Total Debt/Total Assets 35% EBIT $200 Tax Rate 40% Interest Rate on Total Debt 4.57%
1.The ________ measures the return on owners' (both preferred and common stockholders) investment in the firm. 1. 1. return on total assets 2. 2. price/earnings ratio 3. 3. return on equity 4. 4. net profit margin 2.If Nico Corporation has annual purchases of $300,000 and accounts payable of $30,000, then av
A firm has a return on common equity of 13.4 percent, a net after-tax borrowing cost of 4.5 percent, and a return of 11.2 percent on net operating assets of $405 million. What is the firm's financial leverage?
From the following information, calculate the return on common equity for the year 2009 (amounts in millions of dollars). There were no share repurchases. Common shareholders' equity December 31, 2008 174.8 Dividend paid to common shareholders 8.3 Share issue on December 31, 2009 34.4 Common shareholders' equity
See attached file. Carter Corporation had net income of $250,000 and paid dividends of $50,000 to common stockholders and $20,000 to preferred stockholders in 2008. Carter Corporation's common stockholders' equity at the beginning and end of 2008 was $870,000 and $1,130,000, respectively. There are 100,000 weighted-average s
2- Debt ratio Bartley Barstools has an equity multiplier of 2.4, and its assets are financed with some combination of long- term debt and common equity. What is its debt ratio? 3-Du Pont analysis Doublewide Dealers has an ROA of 10 percent, a 2 percent profit margin, and an ROE of 15 percent. What is its total assets turnove
Please give a detail report for the ROE on Starbucks for 2007-2008. Need Excel spread sheet. Please discuss the trend for the ratio and what it tells a person about the organization's financial health.
The Bowley Company manufactures several different products. Unit costs associated with product ICT101 are as follows: Direct materials $60; Direct labor $10; Variable support costs $18; Fixed manufacturing support costs $32; Sales commissions (2% of sales) $4; Administrative salaries $16; Total Costs $140.Total variable costs as
What is the importance of internal equity vs external compensation equity to an employer and an employee? What are the advantages and disadvantages of both to a company? As a manager, how can you ensure internal and external equity in the workplace?