Decided not to replace the depreciated equipment
Course:- Financial Management
Reference No.:- EM131016081

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Financial Management

Two identical firms, A and B, have the same revenue of $10 million and equal variable and fixed costs for the current year. At the start of the year, they both owned $20,000,000 in equipment which follows a depreciation schedule of 5% per year.   Over the year A decided not to replace the depreciated equipment, while B did. They otherwise acted equivalently. Which of the following is a correct implication?

A’s interest coverage ratio over the year exceeded B’s.

B’s interest coverage ratio over the year exceeded A’s.

B paid less tax than A

B will have less cash than A at year’s end

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
What limitations for acquiring or issuing financial instruments are there for small businesses? What guidance do project management principles give for coordinating functional
Arthur’s toys paid a dividend of $3.00 recently. Company projections made by Arthur estimate the dividend will remain at that level for years 1 and 2. Following this, the divi
Assume stocks A and B have had identical stock prices every day for the past three years. Stock A pays a dividend but Stock B does not. Which one of these statements applies t
Calculate the present value savings associated with paying on the last day of the discount trade credit period, as compared to the last day of the net trade credit period. Ass
If Bob and Judy combine their savings of ?$1,000 and ?$700?, ?respectively, and deposit this amount into an account that pays 2% annual? interest, compounded? monthly, what wi
Calvert Corporation expects an EBIT of $23,750 every year forever. The company currently has no debt, and its cost of equity is 16.0 percent. The company can borrow at 9.5 per
The most common source of initial start up capital for a new business is a bank. The major risk in franchising your business is another country are quality control, brand risk
The parks department is considering building a new pool. If the project is approved, the pool will be constructed in 2016 for a total cost of $400,000 to be paid from the cash