Change in the capital structure

Assignment Help Finance Basics
Reference no: EM133110074

Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of $195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 25%. The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure?

Reference no: EM133110074

Questions Cloud

What is the likelihood that the company next quarter : What is the likelihood that the company's next quarter would yield similar net income to the previous quarter?
Calculate the management fee mike : 1. Mathew Johnston invested a total of $17,900 in the New Colony Pacific Region mutual fund. The management fee for this particular fund is 0.60 percent of the
Financial and non-financial strategies : Discuss strategies you have about saving for, and paying for, future health care. Be sure and include both financial and non-financial strategies.
How do chaos and complexity differ from one another : How do chaos and complexity differ from one another? Have you ever experienced Flow? Where/when did you experience it and what did it feel like?
Change in the capital structure : Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of $195,000. The debt-to-total-assets ratio was 27%, the interes
What is dyer current stock price : The company's beta is 1.05, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price?
What is the corresponding debit to wage expense : At the end of 2021 each employee had 6 days of accrued/unused compensated absences. What is the corresponding debit to wage expense
Calculate gross leverage and net leverage : Calculate gross leverage and net leverage, as measured by Debt/EBITDA, through each level of debt, including total debt.
Prepare the journal entries on the lessee books : Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute the cash collections from sales for each quarter

The beginning accounts payable balance is $72 million. Assuming all sales on credit, compute the cash collections from sales for each quarter.

  Approval for a new fiscal year budget

Summarize the types of details would you present to the board of directors finance committee when seeking approval for a new fiscal year budget?

  Risk- free rate on the treasury securities

The total market value of Biz Tech shares is $60 million, and the total market value of its debt is $40 million. The treasurer estimates that the beta of the sh

  Calculating fees on a loan commitment

You have approached your local bank for a start-up loan commitment for $1,030,000 needed to open a car repair store. You have requested that the term of the loan be one-year.

  Why cus are more insulated from interest rate risk

Explain how credit union exposure to liquidity risk differs from that of other financial institutions.  -Explain why CUs are more insulated from interest rate risk than some other financial institutions.

  What is the expected cost for the material over the life

Using the estimates from (a) & (b), what is the expected cost for the material over the life of the project using the COMPLEX method?

  What equal annual deposits must you make each year

What equal annual deposits must you make each year to reach your retirement goal?

  Prepare a swot analysis of panera bread

Prepare a SWOT analysis of Panera Bread and discuss what your analysis revealed about the overall attractiveness of the company's situation.

  Lexical simplicity and lexical composition

Question: What is the difference between lexical simplicity and lexical composition?

  What is the investment value to mcdonald

Suppose a certain site has a McDonald's restaurant on it (equipped with the usual golden arches, etc.). As a McDonald's, the site can generate $50,000 per year.

  Pricing and breakeven analysis

Review the "Pricing and Breakeven Analysis" topic material. Ex plain how a price decrease that increases volume and sales can result in a profit decrease.

  You are planning to make monthly deposits of 450 into a

you are planning to make monthly deposits of 450 into a retirement account that pays 8 percent interest compounded

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