Reference no: EM132806384
Spyder Mann has expected sales of $250 million a year. Variable costs are expected to be 75 percent of sales and fixed operating costs are $20000000 a year. Total capital is presently $400000000 and must be expanded to $600000000 to generate the anticipated sales level. The company presently has no debt outstanding, and 2130000 shares of stock. Additional common stock could be sold for $150 a share. The interest rate on new debt would be 6.5 percent and the tax rate is 21 percent.
Problem 1: Compute the return on equity and earnings per share assuming the expansion is financed:
Sales of $250 million,
Var. cost of 75% of sales,
Fixed cost of $20000000 per year,
new capital needed $200000000 ($600000000 - $400000000),
number of shares 2130000 shares,
stock price of $150,
interest expense of 6.5%,
tax of 21%,
assume no preferred dividends.
a. exclusively with debt,
b. exclusively with equity and
c. with one-half debt and one-half equity.
Problem 2: Calculate return on equity (ROE) and earnings per share (EPS) if expansion is financed by equity.
Group of answer choices
Option 1: 6.2%; $11.09
Option 2: 8.39%; $15.76
Option 3: 5.83%; $10.94
Option 4: 5.6%; $9.69
Option 5: 4.66%; $8.33
|
What are the asset allocation percentages of stock
: What are the asset allocation percentages of stock A, B, and risk-free asset in the complete portfolio if the investor is seeking 4.5% return
|
|
Organization mission statement
: Address what improvements must be made to the organization's mission statement, values, and vision to ensure further alignment with Vision 2030.
|
|
Find the firm roa and asset turnover ratio
: Find the firm's ROA and asset turnover ratio. Torrid Romance Publishers has total receivables of $2,880, which represents 20 days' sales
|
|
What are target sales revenues
: The annual target sales volume for interior doors is 20,000. Stewart has a 20% expected return on sales target. What are target sales revenues
|
|
Compute the return on equity and earnings per share
: Spyder Mann has expected sales of $250 million a year. Compute the return on equity and earnings per share assuming the expansion is financed
|
|
What social forces might underlie it
: Is crime a problem on your campus? If so, what social forces might underlie it?
|
|
What is the yield to maturity
: What is the yield to maturity of a 9.8% semiannual coupon bond with a face value of? $1,000 selling for $894.85 that matures in 9 ?years
|
|
Describe purpose of the quality improvement initiative
: In this assignment, you will propose a quality improvement initiative from your place of employment that could easily be implemented if approved.
|
|
Effective implementation of company strategy
: How does this company's structure and management system promote the effective implementation of the company's strategy?
|