Libris expects assets and current liabilities to grow

Assignment Help Finance Basics
Reference no: EM131133255

The Libris Publishing Company had revenues of $200 million this year and expects a 50% growth to $300 million next year. Costs and expenses other than interest are forecast at $250 million. The firm currently has assets of $280 million and current liabilities of $40 million. Its debt to equity ratio is 3:1. (That is, capi- tal is 75% debt and 25% equity.) It pays 12% interest on all of its debt, and is sub- ject to federal and state income taxes at a total effective rate of 39%.

Libris expects assets and current liabilities to grow at 40%, 10% less than the revenue growth rate. The company plans to pay dividends of $10 million next year.

a. What is the planned debt to equity ratio at the end of next year?

b. Do these results indicate a problem?

Reference no: EM131133255

Questions Cloud

Compute the debt-to gdp ratio in 10 years : Using your favorite spreadsheet software, compute the debt-to-GDP ratio in 10 years, assuming that the primary deficit stays at 4% of GDP each year; the economy grows at the normal growth rate in each year; and the real interest rate is constant, ..
How did they impact european-native american relations : What is a "virgin soil" epidemic? How did they impact European-Native American relations? What would have happened throughout North America if Native Americans had not been so vulnerable to these diseases?
In the context of the agency relationship managers : Select as choices all of the following that you believe depict the 'agency' relationship inside the corporation.
The effect of inflation on the effective capital-gains tax : What is the real interest rate you are paying on your mortgage in each case?
Libris expects assets and current liabilities to grow : The Libris Publishing Company had revenues of $200 million this year and expects a 50% growth to $300 million next year. Costs and expenses other than interest are forecast at $250 million.
Research to develop a new computer game : Your company has spent $250,000 on research to develop a new computer game. The firm is planning to spend $1,400,000 on a machine to produce the new game. Shipping and installation costs for the new machine total $200,000 and these costs will be c..
The following questions on a separate document : Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This h..
Economic policy maker in the united states : Do you agree with your colleague? Discuss the advantages and disadvantages of imposing an explicit Taylor rule on the Fed.
Identify the brand which means three oceans : Identify the brand which means ‘Three Oceans' in English. - and has its motto as "Saving the Earth and Serving its People"

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Company net income for 2015

What is the company's net income for 2015? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

  What is the bonds nominal yield to call

Walker Industries has a bond outstanding with 12 years to maturity, a 9% coupon paid semiannually, and a $1,000 par value. The bond has a 7% nominal yield to maturity, but it can be called in 3 years at a price of $1,045. What is the bond's nomina..

  What is uare''s net income

If UARE, Inc. has sales of 11,300, total assets of 12000, a debt to equity ratio of 1.3 and a return on equity of 15 percent, what is UARE's net income?

  Discuss currency exchange rate movements during the second

discuss currency exchange rate movements during the second half of 2008. did the u.s dollar strengthen or weaken versus

  Is the campaign wrong to run

In your judgment, is the campaign wrong to run? Use the model of ethical decision making described in your notes to explain your reasoning.

  What is the expected dividend for margo industries in 2012

Margo Industries had a payout ratio of 35%, which it expects to keep going forward. The company expects to grow EPS 8% from $1.85 in 2011, while the S&P 500 is expected to grow EPS 6%. What is the expected dividend for Margo Industries in 2012?

  What is the projected dividend for the coming year

The required return on this stock is 10 percent, and the stock currently sells for $76 per share. What is the projected dividend for the coming year?

  Expected cash dividends are 250 the dividend yield is 6

expected cash dividends are 2.50 the dividend yield is 6 flotation costs are 4 of price and the growth rate is 3.

  Describe the basic procedures involved in using risk adjust

Describe the basic procedures involved in using risk-adjusted discount rates (RADRs). How is this approach related to the capital asset pricing model (CAPM)?

  The current price of a stock is 32 and the annual

the current price of a stock is 32 and the annual risk-free rate is 3. a call option with a strike price of 30 and 1

  The theoretical and practical considerations interact in

the theoretical and practical considerations interact in reality. each group will hand in a report that analyzes a

  Define and explain the impact of marginal dollar principal

Define and explain the impact of Marginal Dollar Principa

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd