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Two companies, Energen and Hastings Corporation, began operations with identical balance sheets. A year later, both required additional fixed assets at a cost of $25,000. Energen obtained a 5-year, $25,000 loan at a 10% interest rate from its bank. Hastings, on the other hand, decided to lease the required $25,000 capacity for 5 years, and a 10% return was built into the lease. The balance sheet for each company, before the asset increases, follows: Current assets $ 25,000 Debt $ 50,000 Fixed assets 125,000 Equity 100,000 Total assets $150,000 Total claims $150,000 Show the balance sheets for both firms after the asset increases, and calculate each firm's new debt ratio. (Assume that the lease is not capitalized.) Round the debt ratios to the nearest whole percentage. Energen Balance Sheet (Owns new assets) Current assets $ Debt $ Fixed assets Equity Total assets $ Total claims $ Debt ratio = % Hastings Corporation Balance Sheet (Leases as operating lease) Current assets $ Debt $ Fixed assets Equity Total assets $ Total claims $ Debt ratio = %
Prepare a preliminary report with the top ten countries in terms of population size. -A member of management has indicated that a resource called the "World Population Data Sheet" may be useful for the report.
Suppose that the 3 month and 6 month continuously compounded LIBOR rates are 3% and 3.5% respectively. Assume that LIBOR is used as the risk-free discount rate. What is the value of an FRA under which 4% is paid and LIBOR is received on $10 million f..
The In-Tech Co. just paid a dividend of $1 per share. Analysts expect its dividend to grow at 25% per year for the next three years and then 5% per year thereafter. If the required rate of return on the stock is 18%, what is the current value of the ..
A company must pay liabilities of $19000 and $11000 at the end of years 1 and 2, respectively. The only investments available to the company are 1 and 2 year zero coupon bonds with yields 6% and 7%, respectively. Calculate the cost to the company tod..
Bui Corp. pays a constant $14.50 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price..
Assume there is a regression model that was able to identify the factors that affected exchange rate movements in a recent four year period. Also, suppose that the sensitivity of the exchange rate’s movements to each factor was precisely quantified. ..
Capital budgeting criteria: ethical considerations A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant harm to a nearby river. Calculate the NPV and IRR wit..
Your firm is contemplating the purchase of a new $570,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. If the tax rate is 35 percent, what is the IRR for this project?
An investor, Terry Noirs, is in the 40% tax bracket and has been contemplating investing in corporate bonds. After a recent stay at the Eiffel Payne Hospital, a not-for-profit hospital, he learned that they will be issuing tax-exempt bonds for a majo..
A bank like African Bank is faced with constant changes in the environment they operate in. When designing a corporate strategy for African Bank identifies and describes four (4) such changes that should be taken into account. Use examples in your an..
A French exporter of wine to the United States will receive $377 287 in 90 days. The exporter has collected the following information: Spot exchange rate today: €/$ 0.91167 90-day forward rate: €/$ 0.90870 90-day $ interest rate: 3.25% p.a. 90-day € ..
Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment is scrapped.
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