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Dilana Corporation., has no debt outstanding and a total capital of $600,000. Operating earnings (Earnings before interest and taxes, EBIT) are projected to be $30,000 if economic conditions are normal, $50,000 if conditions are good, and $0 if conditions are bad. The economic conditions are expected to be good with probability of 25%, normal with probability of 50%, and bad with a probability of 25%. Dilana is considering a $120,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 12,000 shares outstanding. Ignore taxes in this question.
Question (a) What is the current share price?Question (b) Calculate earnings per share [EPS] under each of the three economic scenarios before any debt is issued. Also calculate the expected EPS.Question (c) Calculate return on equity [ROE] under each of the three economic scenarios before any debt is issued. Also calculate the expected ROE.Question d) Repeat part (b) assuming that Dilana goes through with recapitalization. What do you observe?Question (e) Repeat part (c) assuming that Dilana goes through with recapitalization. What do you observe?
The planned selling price is $150 per unit. What could be the sales budget for March?
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $659,766 and Allowance for Doubtful Accounts has a balance of $18,550. What is the net realizable value of the accounts receivable?
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Relevance is identified as a fundamental qualitative characteristic in the IASB framework. However, the framework is criticised for not identifying mechanism
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Clarksen Company uses a process costing system. The company requisitioned $93,000 of materials for Department A and $67,000 of materials for Department D. The entry to record the use of the direct materials by these two departments is:
For federal tax purposes, royalty income that is not derived in the ordinary course of a business is classified as:
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Write The entry to provide for uncollectible accounts under the allowance method affects both the statement of income and the statement
On January 1, 2011, Bishop Company issued 10% bonds dated January 1, 2011, with a face amount of $20 million. The bonds mature in 2020 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semi annually on June..
Activity-based costing uses. Hemingway's Hot Dogs sell for $2.00 each. The hot dogs cost Hemingway $0.95 and commissions are $0.15 per hot dog. How many dogs must Hemingway sell if his fixed costs for the stand and rent are $3,500?
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