Decided not to replace the depreciated equipment

Assignment Help Financial Management

Reference no: EM131016081

Two identical firms, A and B, have the same revenue of $10 million and equal variable and fixed costs for the current year. At the start of the year, they both owned $20,000,000 in equipment which follows a depreciation schedule of 5% per year. Over the year A decided not to replace the depreciated equipment, while B did. They otherwise acted equivalently. Which of the following is a correct implication?

A’s interest coverage ratio over the year exceeded B’s.

B’s interest coverage ratio over the year exceeded A’s.

B paid less tax than A

B will have less cash than A at year’s end

Reference no: EM131016081

Questions Cloud

Expense in income statement : Which of the following is an expense in income statement.

Net profits after taxes to produce the numerator : Which of the following is NOT added back to Net Profits After Taxes to produce the numerator in Coverage Ratio?

How many years do these bonds have left until they matre : Backwater Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.5 percent. The current yield on these bonds is 7.85 percent. How many years do these bonds have left until they mature?

Instead of issuing new equity or borrowing from its bank : A business wants to expand production. Instead of issuing new equity or borrowing from its bank, it decides to use the cash on its balance sheet in order to purchase additional equipment. Which of the following are unchanged as a result of this actio..

Decided not to replace the depreciated equipment : Two identical firms, A and B, have the same revenue of $10 million and equal variable and fixed costs for the current year. At the start of the year, they both owned $20,000,000 in equipment which follows a depreciation schedule of 5% per year. Ove..

In developing your export business plan : Select a product of which you will export to a foreign country. After your product is chosen, decide on a foreign country to which you will export. In developing your Export Business Plan,

A companys financial manager retains earnings : A company’s financial manager retains earnings:

Calculate the price of each bond : We observe the following two treasury securities with a par value of $1000 with semiannual coupon payments: Calculate the price of each bond. What is the forward rate over the second 6-month period?

A corporate bond is sold-the nominal rate of interest : A corporate bond is sold for $1,000 (par value) with a 6% coupon. Shortly thereafter, interest rates in the economy (the nominal rate of interest) increases to 8% due to inflation worries. Give this scenario (all other things being equal), which of t..

User Account

All Pages