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Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity 280,000 Total assets $420,000 Total liab. and equity $420,000 Sales $280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only person voting for you. If Schenkel has 390,000 shares out..
A health insurance policy pays 85 percent of physical therapy costs after a $200 deductible. In contrast, an HMO charges $20 per visit for physical therapy. How much would a person save with the HMO if he or she had 10 physical therapy sessions costi..
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $130,000 if credit is extended to these new customers. Compute the incremental income after taxes. What will John..
Last year, DJ's Soda Fountains, Inc. reported an ROE = 27 percent. The firm's debt ratio was 50 percent, sales were $9 million, and the capital intensity ratio was 1.5 times. What is the net income for DJ's last year?
The financial statement of Edgewater marina reflect depreciation expense of $21600 and interest expenses of $27900 for the year .the current assets increased by$31800 and the net fixed assets increased by $28600. what is the amount of net capital spe..
Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 10.25%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)
Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation. Debt: One thousand bonds were issued five years ago at a coupon rate of 10%. They had 25-year terms and $1,000 face..
Suppose you have a project that has a 0.9 chance of tripling your investment in a year and a 0.1 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?
Describe and contrast the rights of bond holders and preferred stockholders. Which has the best position in a default, which one would you buy all other things being equal.
Rixon Corporation purchases CHF call options with a strike price of USD 0.90. The option premium is USD 0.04 per currency unit. A financial analyst at Rixon forecasts the following possible values for spot CHFUSD at maturity. Calculate option payoff ..
Pierre Imports recently issued two types of bonds. The first issue consisted of 10-year straight debt with a 9 percent annual coupon. The second issue consisted of 10-year bonds with a 8 percent annual coupon and attached warrants. Discuss 3 advantag..
Grandin Inc. is evaluating its dividend policy. It has a capital budget of $602,000, and it wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts a net income of $447,000. If it follows the residual dividend p..
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