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Question - AAA corporation has $54,000,000 of current assets and $58,000,000 of noncurrent assets. It forecasts an EBIT of $10,400,000 and pays income taxes at a 35% rate. Short-term bank notes carry a 5% interest rate, and the company can issue long-term bonds at 7%. The company has set a target debt ratio of 45%.
Required -
A. For a maturity mix of 60% current and 40% long-term debt, prepare the company's abbreviated balance sheet.
B. For a maturity mix of 60% current and 40% long-term debt, prepare the company's financial half of its income statement.
C. Based on the financial statements above, calculate the return on equity ratio in order to evaluate the company's risk and return.
D. Based on the financial statements above, calculate the current ratio in order to evaluate the company's risk and return.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
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