Issued new debt last year but debt carries covenants

Assignment Help Financial Management
Reference no: EM131838151

Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio left parenthesis Current Assets minus Inventory right parenthesis divided by Current Liabilities (Current Assets−Inventory)/Current Liabilities of 1.2. Your net income this year was $ 69.6 million. Your cash is $ 10.5 million, your receivables are $ 7.8 million, and your inventory is $ 5.4 million. You have current liabilities of $ 19.1 million. What is the maximum dividend you could pay (in cash and in stock) this year and still comply with your covenants?

Reference no: EM131838151

Questions Cloud

What is the acceleration of the jet : a) What is the acceleration of the jet? b) How many "g's" does the pilot feel while moving in the forward direction during the acceleration?
Discuss the findings of each persons research : Collaborate with your team members to discuss the findings of each person's research and determine what key information will be part of the presentation;
Total electric field equal to zero now : Where on the x axis (x = ____ m), is the total electric field equal to zero now? Answer in meters.
What or who influenced her to become a nurse : Where was influential nurse Margaret Sanger born, , history of family. What or who influenced her to become a nurse
Issued new debt last year but debt carries covenants : Your firm successfully issued new debt last year but debt carries covenants. What is maximum dividend you could pay year and still comply with your covenants
Describe the specific steps that you must perform : Describe the specific steps that you must perform in order to appropriately construct the database model. For each step mentioned, speculate the risks.
Being dropped in a vacuum : How does the speed of a falling object differ from being dropped in air vs being dropped in a vacuum?
What are the magnitude and direction of the force f : A uniform rod of length L and weight W is placed on a fulcrum a distance of 0.4L from the left end. On the left end is placed a mass
What are the pathophysiological changes associated : Mr. Cinder is a 55-year old man admitted to the burn unit 48 hours ago, What are the pathophysiological changes associated with severe burns

Reviews

Write a Review

Financial Management Questions & Answers

  Long forward contract with a forward price

Joe is long a forward contract with a forward price of $75. Kate is short the forward contract at the same strike.

  What is the return expected on investment measured

What is the return expected on investment measured in dollar terms if the opportunity cost rate is 10 percent and provide an explanation, in economic terms, of your answer.

  Used initial cash flow for building project

Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $650,000. The lot was recently appraised at $695,000. At the time of the purchase, the company spent $31,000 to grade the lot and another $3,500 to build a small buildi..

  Not a current asset

Which of the following is NOT a current asset? a. Inventory b. Accounts receivable c. Cash d. A rent deposit expected to be received back in 3 months when a lease expires. e. All of these are current assets.

  Returns between willow stock and sky diamond stock

The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0860. The variance of Willow is 0.1440, and the variance of Sky Diamond is 0.1020. What is the correlation coefficient between the returns of the two stocks?

  Annual cost of financing for franc-denominated bonds

ALTEC Inc. can issue bonds in either U.S. dollars or in Swiss francs. Dollar-denominated bonds would have a coupon rate of 15%; Swiss franc–denominated bonds would have a coupon rate of 12%. what is the annual cost of financing for the franc-denomina..

  Estimate the cost of equity

Caballos, Inc., has a debt to capital ratio of 27%, a beta of 1.26 and a pre-tax cost of debt of 6.8%. The firm had earnings before interest and taxes of $ 515 million for the last fiscal year, after depreciation charges of $ 292 million. Assume that..

  Offer the best return on investment

Which of the following would offer the best return on investment? Assume that you buy $4,000 in stock in all three cases,

  Effective annual yield percentage for domestic-euro bond

The Boeing Company has two different debt issues, both maturing four years from now. The domestic bond issue pays semiannual coupons and has a coupon rate of 4.80 percent. The current price on the bond is $951.30. The Eurobond issue is priced at $985..

  What is the current market price of this bond

A corporate bond, paying $65 interest at the end of each year for 6 years, has a face value of $1,000. If market rates on newly issued similarly rated corporate bonds are now 7.5%, what is the current market price of this bond?

  How could the federal reserve use the interest rate

How could the Federal Reserve use the interest rate it pays on bank reserves to restrain banks from lending large amounts of excess reserves and increasing the money supply excessively?

  Cost of capital and capital structure

Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget. Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget. The corporate tax..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd