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Martin Aerospace is currently operating at full capacity based on its current level of assets. Sales are expected to increase by 4.5 percent next year, which is the firm's internal rate of growth. Net working capital and operating costs are expected to increase directly with sales. The interest expense will remain constant at its current level. The tax rate and the dividend payout ratio will be held constant. Current and projected net income is positive. Which one of the following statements is correct regarding the pro forma statement for next year?
Total assets will increase at the same rate as sales.
Long-term debt will increase in direct relation to sales.
Owners' equity will remain constant.
The pro forma profit margin is equal to the current profit margin.
Retained earnings will increase at the same rate as sales.
Pet Food Company bonds pay an annual coupon rate of 7.92 percent. Coupon payments are paid semiannually. Bonds have 14 years to maturity and par value of $1,000. Compute the value of Pet Food Company bonds if the market interest rate on this type of ..
The Home Supply Co. has a current accounts receivable balance of $280,000. Credit sales for the year just ended were $1,830,000. How many days on average did it take for credit customers to pay off their accounts during this past year?
Weisbro and Sons common stock sells for $32 a share and pays an annual dividend that increases by 4.2 percent annually. The market rate of return on this stock is 9.90 percent. What is the amount of the last dividend paid by Weisbro and Sons?
With a projected annual sales growth of 15% projected annual earnings retention of 12%, and a cash cycle of 30 days, is there a need for external financing?
Shock Electronics sells portable heaters for $35 per unit, and the variable cost to produce them is $22. Mr. Amps estimates that the fixed costs are $97,500. 1. Compute the break-even point in units. 2. Fill in the table (in dollars) to illustrate th..
Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of .7 and an expected return of 8.6 percent. If the risk-free rate is 5 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for stocks Y an..
One feature that all annuity contracts have in common is that the annuitant can never outline the annuity payments. Risky investments always perform better than less risky investments over a five-year period. Generally, investments that have the pote..
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 14 percent, –14 percent, 16 percent, 26 percent, and 10 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bi..
If a firm buys under terms of 3/15, net 30, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume 365 days in year for your calculations. Does it receive more or less credit than ..
Weston Industries has a debt–equity ratio of 1.1. Its WACC is 9.6 percent, and its cost of debt is 7.2 percent. The corporate tax rate is 35 percent. What is Weston’s cost of equity capital? What is Weston’s unlevered cost of equity capital.
If all capital outlays are funded from retained earnings and new borrowings and if Clynne follows a residual dividend policy, what capital outlays are planned for the coming year?
Making decisions in business can be difficult. Fortunately, we have a lot of great tools to help us! Choose two decision-making tools you learned in our materials this week and explain how you would use them to decide with an actual problem you have ..
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