Libris expects assets and current liabilities to grow

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"

User Account

All Pages