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A company anticipates revenues next year of $3,000,000. Interest expense is expected to remain the same at $50,000. The company expects to pay $40,000 in cash dividends.
Below is the Income Statement as of December 31, 2014.
Prepare a Pro-Forma income statement for December 31, 2015 using the percentage of sales method.
ACTUAL 2014
Sales Revenue $1,700,000
COGS $1,105,000
Gross Profits $595,000
Operating Expenses $120,000
EBIT $475,000
Interest Expense $50,000
EBT $425,000
Tax $170,000
Dividends $15,000
To Retained Earnings $240,000
Discuss the following statement. All else equal, firms with relatively stable sales are able to carry relatively high debt ratios. Is the statement true or false? Why? Explain.
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Using both operating leverage and financial leverage allows organizations to magnify their returns. Leverage not only magnifies returns as volume increases but can also magnify losses as volume decreases.
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Both bond A and bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while bond B has 16 years to maturity. a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of bond A an..
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