Reference no: EM132998758

Question -

Q1. Azalea Inc. is a private company with 1,550,000 common shares outstanding. It also has 450,000 preferred shares outstanding with an annual dividend rate of $3.75 per share. The dividends on these preferred shares were paid during the year, along with a dividend of $1.35 per share on the common shares. The company recently reported net income of $5,785,600 for the year. Research has discovered three comparable companies that reported the following:

Comparable 1 - Current share price $145.00; EPS $11.93

Comparable 2 - Current share price $85.00; EPS $7.50

Comparable 3 - Current share price $64.50; EPS $5.66

What is the estimated price per common share for Pham?

a) $15.05

b) $27.70

c) $30.75

d) $32.13

Q2. Azalea Inc. is looking to increase its loan from the bank to finance a planned expansion. The loan agreement requires that the company's interest coverage ratio be at least 4.0. The loan has an interest rate of 5%. The company forecasts earnings before interest and taxes (EBIT) to be $1,576,900 and net income to be $1,175,400 for the coming year. What is the maximum amount of the loan that Azalea could have outstanding for the year and not be in violation of its covenant?

a) $4,701,600

b) $5,877,000

c) $6,307,600

d) $7,884,500

Q3. Azalea Inc. is considering writing off its obsolete inventory at the end of the year. The writeoff is part of a restructuring and will be included in a restructuring cost line on the income statement.

What is the impact of recording this writeoff on the inventory turnover ratio and the current ratio?

a) The inventory turnover ratio will decrease and the current ratio will increase.

b) The inventory turnover ratio will increase and the current ratio will decrease.

c) The inventory turnover ratio will increase and the current ratio will increase.

d) The inventory turnover ratio will decrease and the current ratio will decrease.