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Crum Co’s balance sheet and income statement for 2001 are given below. The firm expects sales to grow by 50% in 2002. Operating costs, spontaneous liabilities and assets will increase in proportion to sales. The company plans to finance any additional funds needed using debt at an interest rate of 10%. What is the company’s projected funds needed for 2002? Assume interest expenses are 10% of the beginning year of debt balance. 2001 2002 – 1st pass 2002 – 2nd pass Sales $1,000 Operating costs 800 EBIT 200 Interest 16 EBT 184 Taxes (40%) 73.6 Net Income 110.40 Dividends (60%) 66.24 Addn. To RE 44.16 Cash 30 A/R 150 Inventories 200 Total CA 380 Gross FA 700 Accum. Depreciation 80 Net FA 620 Total assets 1000 A/P and accruals 150 Debt 200 Common stock 150 Retained Earnings 500 Total Liab. & Equity 1000
You have $100,000 invested. Of that, $50,000 is invested in IVM stock which has a beta of 1.4, $30,000 is invested in UBM stock with a beta of 1.2, and the remainder is invested in T-Bills. Which of the following is true?
One year ago, an American investor bought 2000 shares of London Bridges at a price of £24 (or 24 UK pounds) per share when the exchange rate was $1.4/1£ (or $1.40 dollars = 1 pound). The investor also invested 4,000,000 Japanese Yen in a money market..
We are evaluating a project that costs $1,180,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 88,100 units per year. Suppose the projections g..
What is your total return on the stock? What is the dividend yield? What is the capital gains yield and what is the expected return of the stock according to the security market line?
Stock X has an expected return of 12% and a standard deviation of 8%. Stock Y has an expected return of 8% and a standard deviation of 5%. The correlation coefficient between the returns for X and Y is 0.2. Supposing these are the only 3 assets in th..
(Present value comparison) Much to your surprise, you were selected to appear on the TV show "The Price is Right". As a result of your prowess in identifying how many rolls of toilet paper a typical American family keeps on hand, you win the opportun..
Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of..
If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Explain the difference between WACC and MCC. What determines whether to use the dividend growth model approach or the CAPM..
You buy a stock for $20. After a year the price rises to $25 but falls back to $20 at the end of the second year. What was the average percentage return and what was the true annualized return?
The Chicago bank has agreed to process Jackson's customer payments for an annual fee of $130,000. Determine the annual net pretax benefits to Jackson's of establishing a lockbox system with the Chicago bank.
Last year, you purchased a stock at a price of $82.00 a share. Over the course of the year, you received $3.30 in dividends and inflation averaged 2.7 percent. Today, you sold your shares for $86.70 a share. What is your approximate real rate of retu..
What is the total present value of the following series of cash flows, discounted at 10 percent?
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