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FIT Corporation"s return on net operating assets (RNOA) is 10% and its tax rate is 40%. Its net operating assets ($4 million) are financed entirely by common shareholders" equity. Management is considering its options to finance an expansion costing $2 million. It expects return on net operating assets to remain unchanged. There are two alternatives to finance the expansion:
1. Issue $1 million bonds with 12% coupon, and $1 million common stock.
2. Issue $2 million bonds with 12% coupon.
Required:
a. Determine net operating income after tax (NOPAT) and net income for each alternative.
b. Compute return on common shareholders" equity for each alternative (use ending equity).
c. Calculate the assets-to-equity ratio for each alternative.
d. Compute return on net operating assets and explain how the level of leverage interacts with it in helping determine which alternative management should pursue.
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Using the data complete the statements and schedules for the first quarter
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The results of the survey are summarized as follows. Income Group Low Middle High Play often 190 160 150 Play Sometimes 260 ..
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That US parent company ABC has a subsidiary XYZ in Outer Mongolia. XYZ's total assets are as follows in Mongolian marks and evaluate what is the total value of assets if the functional currency is the Outer Mongolian mark?
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