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XYZ's balance sheet and income statement are given below: Balance Sheet: Cash $ 50 Accounts payable $ 100 A/R 150 Notes payable 0 Inventories 300 Long-term debt (10%) 700 Fixed assets 500 Common equity (20 shares) 200 Total assets $1,000 Total liabilities and equity $1,000 Income Statement: Sales $1,000 Cost of goods sold 855 EBIT $ 145 Interest 70 EBT $ 75 Taxes (33.333%) 25 Net income $ 50 The industry average inventory turnover is 5, the interest rate on the firm's long-term debt is 10%, 20 shares are outstanding, and the stock's P/E is 8.0. If XYZ increased its inventory turnover to the industry average, if it used freed-up funds to buy back common stock at the current market price and thus to reduce common equity, and if sales, the cost of goods sold, and the P/E ratio remained constant, by what dollar amount would its stock price increase?
$ 3.33
$ 6.67
$ 8.75
$10.00
$12.50
Pettway Corporation’s next annual dividend is expected to be $4. The growth rate in dividends over the following three years is forecasted at 15%. After that, Pettway’s growth rate is expected to equal the industry average of 5%. If the required retu..
Ms. Roberts is thinking of investing in an annuity that pays her $10,000 in one year, and this payment keeps growing by 1% per year till the last payment that occurs 20 years from today. What is the fair value of this investment if the discount rate ..
To calculate the after-tax cash flow for a firm using an Income Statement, you would ______.
Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $5 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require ..
To look at the firm's dividend policy, you look at RAD's financial statements for the last year. RAD, in 2013, had net income of $118 million (operating income $1,132 million), capital expenditures of $315.846 million, depreciation and amortization o..
A particular firm is owned by members of a single family. Most of the wealth of this family is derived from the operations of this firm, and the family does not want to "go public" with the firm by selling its equity position to outside investors. Wi..
The most recent financial statements for Live Co. are shown here: Income Statement Balance Sheet Sales $11,000 Current assets $23,719 Debt $23,377 Costs 6,600 Fixed assets 16,598 Equity 16,940 Taxable income $4,400 Total $40,317 Total $40,317 Taxes (..
You are looking at buying a bond as an investment. You are considering one that has a $1,000 par value and pays $25 interest every 6 months. It matures in 15 years and you can buy it for $875. Your required rate of return is 6%. Should you buy the bo..
Consider the following information: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom 0.15 0.40 0.50 0.30 Good 0.60 0.16 0.10 0.09 Poor 0.20 − 0.02 − 0.05 − 0.03 Bust 0.05 − 0.18 − 0.25 − 0.1..
ABC Tec Inc. is expected to produce $100 million FCF (free cash flow) at the end of year 3, $150 million FCF at the end of year 4, $180 million at the end of year 5 and thereafter the FCF is expected to grow at a constant rate of 4%. No FCFs ($0) are..
Last year, $100 million in outstanding bank loans to a developing nation’s government were not renewed, and the developing nation’s government paid off $50 million in maturing government bonds that had been held by foreign residents.
A bond with a 12 percent quarterly coupon rate has a yield to maturity of 16 percent. The bond has a par value of $1,000 and matures in 20 years. Based on this information, what is a fair price of this bond?
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