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Long-Term Financing Needed At year-end 2015, Wallace Landscaping’s total assets were $1.7 million and its accounts payable were $395,000. Sales, which in 2015 were $2.2 million, are expected to increase by 15% in 2016. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $485,000 in 2015, and retained earnings were $290,000. Wallace has arranged to sell $75,000 of new common stock in 2016 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2016. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 4%, and 35% of earnings will be paid out as dividends. What was Wallace's total long-term debt in 2015? Round your answer to the nearest dollar $ _____ What were Wallace's total liabilities in 2015? Round your answer to the nearest dollar $ ____ How much new long-term debt financing will be needed in 2016? (Hint: AFN - New stock = New long-term debt.) Round your answer to the nearest dollar. Do not round intermediate calculations $_____.
In terms of option theory, explain the impact on the offering yield of adding a call feature to a proposed bond issue.
The real risk-free rate is 3.5%. Inflation is expected to be 1.75% this year and 4.75% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury secur..
Explain ?carefully what happens if the investor exercises the option after two months. ?Suppose that the futures price at the time of exercise is 362 and the most recent ?settlement price is 360.
Stock X and Stock Z both have an expected return of 10%. The standard deviation of the expected return is 8% for Stock X, and 12% for Stock Z. Assume that these are the only two stocks available in a hypothetical world. What is the expected return an..
Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 5.90 percent loan with gross proceeds of $5,970,000. The interest payments on the loan will be made annually. Calculate the net present value of the loan excluding flotation costs. C..
Will security prices increase, decrease, or stay the same following this announcement?
What stock price is expected 1 year from now? What is the required rate of return?
A UCF graduate writes 22 checks per month and pays $0.25 per check. The bank pays the graduate 1% interest per annum, and he/she maintains an average monthly balance of $600. What is the graduate's net annual cost of maintaining the checking account ..
Compute the present value of bankruptcy costs for Slash and Burn. - Recalculate the value of the company, assuming that the firm's shareholders face a 25 percent personal tax rate on equity income.
Why should we (managers) learn calculations involving the time value of money? What kind of management decisions does it help us make?
The Carlton Corporation has $5 million in earnings after taxes and 2 million shares outstanding.Compute the current price of the stock.
A firm’s bond currently sells for $1,040, has a 7% coupon interest rate and $1,000 par value, pays interest annually, and has 8 years to maturity. The firm’s corporate tax rate is 35%. What is the after-tax cost of the bond?
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