Compute the anticipated return after financing costs

Assignment Help Financial Management
Reference no: EM132037916

Assume that Hogan Surgical Instruments Co. has $4,000,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 18 percent, but with a high-liquidity plan, the return will be 14 percent. If the firm goes with a short-term financing plan, the financing costs on the $4,000,000 will be 10 percent, and with a long-term financing plan, the financing costs on the $4,000,000 will be 12 percent.

a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.

b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.

c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.

Reference no: EM132037916

Questions Cloud

What is effective rate of interest : What is the effective rate of interest? What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan?
What is the average receivables balance : Dome Metals has credit sales of $288,000 yearly with credit terms of net 120 days, What is the average receivables balance?
What will be the rate of return on investment in bond : If the investors forecast accurately, what will be the rate of return on an investment in this bond over the next year?
What is the likely yield to maturity on the bonds : The bonds are only forecasted to pay 82% of their par value. What is the likely yield to maturity on the bonds?
Compute the anticipated return after financing costs : Compute the anticipated return after financing costs with the most aggressive asset-financing mix.
What is the proportion invested in each of two risky funds : What is the proportion invested in the T-bill fund? What is the proportion invested in each of the two risky funds?
What is the total cost of ordering and carrying inventory : What is the economic ordering quantity? How many orders will be placed during the year? What is the total cost of ordering and carrying inventory?
Appropriate discount rate to calculate npv of decision : What is the appropriate discount rate to calculate the NPV of this decision? Explain
Rate per annum with continuous compounding : What is the rate of interest that you receive on the money that you have lent in 9 give this rate per annum with continuous compounding.

Reviews

Write a Review

Financial Management Questions & Answers

  What is your profit at the current exchange rate

Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2871 S$/US$. You have just placed an order for 34,000 motherboards at a cost to you of 233.50 Singapore dollars each. What is your profit if the excha..

  Estimated annual operating cash flow from this project

If straight-line depreciation is used to calculate annual depreciation, what is the estimated annual operating cash flow from this project?

  Constant growth valuation-estimated required rate of return

Woidtke Manufacturing's stock currently sells for $32 a share. The stock just paid a dividend of $2.75 a share (i.e., D0 = $2.75), and the dividend is expected to grow forever at a constant rate of 4% a year. What stock price is expected 1 year from ..

  Earnings that are high quality would

Earnings that are high quality would

  What percentage is flotation costs

How much did the bank charge SS? What percentage is flotation costs?

  Working on retirement savings plan

You are working on a retirement savings plan. You will deposit money every month for the next 40 years (480 months total) in your account.

  Operating small weapons production facilities

Three different plans were presented to the US GAO (Government Accountability Office) by a high-technology facilities manager for operating small weapons production facilities. Plan A would involve renewable 1-year contracts with payments of $1 milli..

  What is the retained earnings balance at the end of the year

Cindy's Crafts had beginning retained earnings of $51,200. During the year, the company reported sales of $112,400, costs of $75,800, depreciation of $9,100, dividends of $1,500, and interest paid of $2,300. The tax rate is 34 percent. What is the re..

  Effective annual internal rate of return on this investment

What is his effective annual internal rate of return on this investment?

  Standard deviation of the rate of return on new portfolio

You are the portfolio manager for a mutual fund. Your fund has an expected return of 15% with a standard deviation of 24% and the T-bill rate is 3%. Calculate the weight w. What is the standard deviation of the rate of return on the new portfolio?

  New gear assembly project

Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1430 per unit; variable costs = $316 per unit; fixed costs = $3931656; quantity = 71456 units. Suppose the company believes all of its estimates are acc..

  Used to determine the projects relative irrs

The solution cannot be determined because the problem gives us no information that can be used to determine the projects' relative IRRs.

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