What are the cash flows to tom under each scenario

Assignment Help Financial Management

Reference no: EM132031468

Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does.

If he works 40 hours each week, the company's EBIT will be $590,000 per year; if he works a 50-hour week, the company's EBIT will be $705,000 per year.

The company is currently worth $3.60 million. The company needs a cash infusion of $1.70 million, and it can issue equity or issue debt with an interest rate of 10 percent. Assume there are no corporate taxes.

What are the cash flows to Tom under each scenario? (Enter your answers in dollars, not millions of dollars (e.g. 1,234,567). Do not round intermediate calculations.)

Scenario-1

Debt issue:

Cash flows
40-hour week $
50-hour week $

Scenario-2

Equity issue:

Cash flows
40-hour week $
50-hour week $

Reference no: EM132031468

Questions Cloud

What is toms effective annual rate : Tom purchased 100 shares of Dalia Co. stock at a price of $129.90 four months ago. He sold all stocks today for $124.92.

What are the four nucleotides of dna : What are the four nucleotides of DNA and what causes a DNA mutation?

How all of should be invested using portfolio theory : Top Choice Investments, one of the companies that you have been investing for, have given you £2,000,000 to invest for them.

Prepare the depreciation table for floppy truck : Prepare the depreciation table for Floppy's truck assuming that the company uses the straight-line method for depreciation

What are the cash flows to tom under each scenario : The company needs a cash infusion of $1.70 million, and it can issue equity or issue debt with an interest rate of 10 percent.

Prepare flipper supply co general journal entries : Prepare Flipper's Supply Co. general journal entries for the following transactions: Jan. 25 Loaned Flam Co. $30,000 cash, accepting a 90 days, 10% note

What is toms dollarweighted average return on his investment : In the second his portfolio loses 4% but sticking to his plan, he adds $1,000 to his portfolio. In this year his portfolio returns 2%.

Transfusion reaction occur the first time : Why doesn't a transfusion reaction occur the first time an Rh negative patient is exposed to Rh positive blood?

Determine who was paid the most and who was paid least : Use a truth table to determine who was paid the most and who was paid the least. Assume that they are all paid different amounts.

User Account

All Pages