Assume that sales-operating costs and total assets

Assignment Help Financial Management

Reference no: EM13721825

Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets of $355,000. The debt-to-total-assets ratio was 17%, the interest rate on the debt was 7.5%, and the firm's tax rate was 35%. The new CFO wants to see how the ROE would have been affected if the firm had used a 50% debt ratio. Assume that sales, operating costs, total assets, and the tax rate would not be affected, but the interest rate would rise to 8.0%. By how much would the ROE change in response to the change in the capital structure?

Reference no: EM13721825

Questions Cloud

Determine the dpbp of this investment : An investment of $1,011,000 today yields positive cash flows of $200,000 each year for years 1 through 10. MARR is 12%. Determine the DPBP of this investment

Water filtration system to assist in circuit board : Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $60,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and mainten..

What is the share dividend : The Sharpe Co. just paid a dividend of $2.05 per share of stock. Its target payout ratio is 40 percent. The company expects to have earnings per share of $6.20 one year from now. If the adjustment rate is .3 as defend in the Lintner model, what is th..

The effective before tax cost of capital : To help fund an addition to your house, you borrow $25,000 from your bank. The conditions of your loan state that the interest rate is 9 percent compounded monthly. The Effective before tax cost of capital?

Assume that sales-operating costs and total assets : Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets of $355,000. The debt-to-total-assets ratio was 17%, the interest rate on the debt was 7.5%, and the firm's tax rate was 35%. The new CFO wants to see how t..

Data quality plan : 1. Discuss the elements that should be included in a data quality plan. This plan should consider all the factors that influence the uses of data, data quality, and HIM functions.

List and discuss the four transaction properties : 1.Write two to three paragraphs answering each of the following questions: a What are the three types of database critical events that can trigger the database recovery process? Give some examples for each one. b List and discuss the four transacti..

Ways in which we as researchers can present our data : What are some ways in which we as researchers can present our data and our findings in a way that can be understood my managers, employees and other stakeholders?

How would you define research : How would you define research? What is the purpose of business research? How has the Internet changed the quality and quantity of research?

User Account

All Pages