Return on equity-developed new operating plan

Assignment Help Financial Management
Reference no: EM131502717

RETURN ON EQUITY Pacific Packaging's ROE last year was only 4%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 55%, which wil resut in annual interest charges of $800,000. The firm has no plans to use preferred stock and total assets equal total invested capital. projects an EBIT of o $1,780,000 on sales of $20,000,000, and it expects to have a total assets Management made, what tumover ratio of 2.6. Under these conditions, the tax 30%. irthe changes will be the company's return on equity? Do not round intermediate ane caloulations. Round your answer to two decimalplaces. Check My Work Icon Key

Reference no: EM131502717

Questions Cloud

Calculate your company expected return : Use the following information to calculate your company's expected return
What is payback period for this project : What is the payback period for this project? Their acceptance period is five years.
IRR methodology compared to the NPV methodology : It is important for managers to accept positive NPV projects. What are some problems with the IRR methodology compared to the NPV methodology?
What are the partnership terms-partnership agreement : What are the partnership terms? Are there any matters not addressed, that you think should have been addressed by the partnership agreement?
Return on equity-developed new operating plan : Pacific Packaging's ROE last year was only 4%; but its management has developed new operating plan that calls for debt-to-capital ratio of 55 %
What is the yield to maturity of a bond : What is the yield to maturity of a bond that has a price of $800 and pays $300 of interest annually, forever?
What is expected return of your portfolio : What is the expected return of your portfolio if Jacob, Bella and Edward have expected returns of 0.03, 0.16, and 0.01, respectfully.
Company value using the present value of future dividends : How important to estimate a company value using the present value of future dividends.
What is the firms sustainable growth rate : What is the firm’s sustainable growth rate? If the firm grows at its sustainable growth rate, how much debt will be issued next year?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the yield to maturity if interest is paid once year

bond with face value of $1,000 has 8 years until maturity, carries coupon rate of 5.0% and sells for $1,065. What is yield to maturity if interest is paid year.

  Discounted cash flow model to determine the NPV

A five-year software development project is forecast to have net cash inflows of $15,000, $20, 000, $25,000, $30,000, and $50,000 in the next five years. It will cost $80,000 to implement the project, payable at the beginning of the project. If the r..

  Which firm will experience the highest return on equity

Firms R and S are similar firms in the same industry. Firms R and S have the same profit margin and total asset turnover when compared. However, Firm R's capital structure is 60% debt, 40% equity, and Firm S's capital structure is 30% debt, 70% equit..

  What is the cost of preferred stock capital

Preferred stock of Ford Motors pays a dividend of $3 each year and trades at a price of $21. What is the cost of preferred stock capital for Ford?

  Annual rate of return on this sculpture

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, an auction house sold a sculpture at auction for a price of $10,261,500. Unfortunately for the previous owner, he had purchased it in..

  What is net present value and rate of return of project

International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. If IMC undertakes the project, what is the net present valu..

  Interest compounded annually

What would be your annual return (interest compounded annually) if you paid $10,000 for a stock that paid a $400 annual dividend, and sold the stock 12 years later for $22,000?

  What type of position has this investor created

An investor purchases a call option with a strike price of $40 and a premium of $3. At the same time, she sells a call option with a strike price of $45 and a premium of $1.25 on the same stock and with the same expiration date. What type of position..

  Manufactures no-inhale cigarettes

Boomer Products, Inc. manufactures “no-inhale” cigarettes. As their target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest that earnings and dividends will decline at a rate of 5% (-5%) annually for..

  What is the stocks value per share

Smith Technologies is expected to generate $175 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 12%. If smith has 65 million shares..

  Constraint on investment project payback requirements

Ferengi, Inc. is subject to an applicable corporate tax rate of 35 percent, and the weighted average cost of capital (WACC) of 12.5 percent. There is no specific time constraint on investment project payback requirements. What would be the NPV of Pla..

  How many shares must the company sell to the public

A company wants to raise $350 million in a new stock issue. Its investment banker indicates that sale of the new stock will require 20% under pricing an dan 8% spread. if the company’s stock price does not change from its current price of $35 per sha..

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