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Dickinson Company has $11,820,000 million in assets. Currently half of these assets are financed with long-term debt at 9.1 percent and half with common stock having a par value of $8. Ms. Smith, Vice-President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 9.1 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable.
Under Plan D, a $2,955,000 million long-term bond would be sold at an interest rate of 11.1 percent and 369,375 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 369,375 shares of stock would be sold at $8 per share and the $2,955,000 in proceedswould be used to reduce long-term debt. a.How would each of these plans affect earnings per share? Consider the current plan and the two new plans. (Round your answers to 2 decimal places.)
b- Compute the earnings per share if return on assets fell to 4.55 percent. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
Austin Corporation bought 25 percent of the voting common stock of Gainsville Corporation, paying $2,000,000. Austin decided to use the equity method to account for this investment.
XYZ Ltd paid= $200,000 for feasibility study on project about a year ago. You are needed to compute: The amount of the loan repayments. The accounting rate of return (gross and net).
In brief explain the types of risks faced by investors in domestic bonds? Also point out the additonal risks associated with nondomestic bonds. Describe the differece between Stocks and Bonds and which one Corporations use most to raise capital.
Suppose you are the financial manager at CYA Corporation and you are considering three different levels of working capital. You estimate that sales would reduce slightly with lowered levels of current assets and you suppose that your forecasts are re..
Computation of value of bond and What is the value of an individual bond from this issue to an investor who purchases the Wilson bond on the date of issue
Discuss budgeting, defining how you might present the concept to a client; OR Define and discuss personal financial statements, stating the major variables involved and how the statements might be used in financial planning.
What is the yield to maturity on the bond?
General Mills makes Wheaties, Cheerios, Betty Crocker cake mixes, and many other food products. Assume the product manager of a new General Mills cereal has estimated that the appropriate wholesale price for a carton of the cereal is $48.
Bond J is a 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 percent.
Kinky Copies may buy a high volume copier. The machine cost $100,000 and will be depreciated straight-line over five years to a salvage value of $20,000.
Explain What is the cost of financing and WACC and what is the after-tax cost of debt financing
An investor deposits $50,000 today in the interest bearing account. How much would the investor accumulate by the end of five years if interest is compounded monthly?
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