Calculate the net earnings after tax

Assignment Help Accounting Basics

Reference no: EM13258824

JenCo is planning to expand their business. The expansion will require new assets totaling AED 15,000,000; 70% will be the fixed assets and 40% of the total current assets will be permanent innature. JenCo is considering two alternative asset-financing plans.

Plan 1: Under this plan, all fixed assets and permanent current assets will be financed using long-term debt; the rest of the assets will be financed using short-term funds.

Plan 2: Under this plan, all fixed assets and 50% of the permanent current assets will be financed using long-term funds and the balance will be in short-term loans.

The cost of long-term financing is 12% and short-term at 9%. The expansion is expected to generate additional earnings before interest and tax of AED 8,500,000. JenCo pays tax at the rate of25%.

Question:

1: Calculate the net earnings after tax under each plan and show all of your calculations clearly.

2: Also define that what is therelation between Exchange Rate and theInterest Rate? If exchange rate increasesthen what will be the effect on interest rate....vice versa?

Reference no: EM13258824

Questions Cloud

What is the value per share of your firms stock : After that period, growth should match the 6 percent industry average rate. The last dividend paid (D0) was $1. What is the value per share of your firm's stock?

Contrast the free market systems with planned economies : Compare and contrast the free market systems with planned economies. determine the benefits and drawbacks of each. analyze the different ways to evaluate economic performance and determine.

Find true and approximate relative errors as terms are added : e^-x=(1/e^x)=1/(1+x+(x^2/2)+(x^3/3!)+...) and compare with the true value of 6.737947*10^-3. Use 20 terms to evaluate each series and compute true and approximate relative errors as terms are added.

What is the depreciation tax shield : (a) Determine the annual net operating cash flows (OCF) generated by the machine. (b) What is the depreciation tax shield? c) Suppose the required rate of return is 12 percent, and the life of the project is 10 years. What is the project's NVP?

Calculate the net earnings after tax : Calculate the net earnings after tax under each plan and show all of your calculations clearly.

Determining the basic earnings per share : Epic Company earned a net income of $900,000 this year. The number of common shares outstanding during the entire year was 400,000,and preferred shareholders received a $20,000 cash dividend. Compute Epic Company's basic earnings per share.

Determine the difference in travel time for light : On the Moon\'s surface, lunar astronauts placed a corner reflector, off which a laser beam is periodically reflected. What is the difference in travel time for light that travels only through space to the moon and back and light that travels through..

Find the magnitude of the average net force : During the landing, the force of the ground on the man points upward, while the force due to gravity points downward. The average net force acting on the man includes both of these forces.

Offer a synthesis of butane-2 and 3-diol : Provide a synthesis of butane-2,3-diol from 1 or 2 carbon alkanes. Use any reagents. Show the steps and the products formed for each step.

User Account

All Pages