Explain net income, Operation Management

Assignment Help:

Scott Equipment Organization is investigating various combinations of short- and long-term debt in financing assets. Assume the organization has decided to employ $10 million in current assets and $15 million in fixed assets in its operations next year, and EBIT for next year is $8 million. The organization's income tax rate is 40%. Stockholders' equity will be used to finance $15 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing one of the policies below. Current Assets: $10 million Fixed Assets: $15 million Total Assets : $25 million Stockholders' Equity: $15 million Total Amount of Assets to be financed by debt: $10 million Tax Rate: 40% Total EBIT: $8 million Aggressive Strategy Short Term Debt: $8 million, 6% interest rate Long Term Debt: $2 million, 8% interest rate Moderate Strategy Short Term Debt: $5 million, 5.5% interest rate Long Term Debt: $5 million,7.5% interest rate Conservative Strategy Short Term Debt: $3 million, 5.25% interest rate Long Term Debt: $7 million, 7.25% interest rate Determine the following for each policy: • Net Income • Expected rate of return on stockholders' equity (Net Income/Equity) • Net working capital position (Current Assets - Current Liabilities) • Current ratio (Current Assets/Current Liabilities) • Would you rate them low, medium, or high with respect to profitability? • Would you rate them low, medium, or high with respect to risk? • What is your recommendation to management? Why?


Related Discussions:- Explain net income

How the expected time estimate is calculated in pert, How the expected time...

How the expected time estimate is calculated in PERT ? In PERT the expected time estimate is computed on the basis of Beta distribution of time estimates.

Various levels of customer service in your organization, Has the philosophy...

Has the philosophy that there are different levels of customers had any material effect on the value of your organization's customer service? • Identify and explain the differen

Explain the job performed by engineers, 1. What are some of the major diffe...

1. What are some of the major differences between the job performed by engineers and the job performed by engineer managers?

Explain how did social media play a role in these uprisings, 1 What the spa...

1 What the spark that started the current uprisings in the Middle East? Explain. 2 Apply your knowledge of the importance of Rule of Law into the current uprisings in the Middle

Explain what types of risks are inherent in a project, 1. What do each of t...

1. What do each of the letters in the SMART acronym stand for? 2. In your own words, describe what each piece of the SMART acronym means? 3. Why is the SMART acronym an impor

., The following process is designed to handle 120 customers a day. The cus...

The following process is designed to handle 120 customers a day. The customer is “processed” through each of the two operations, A and B, in sequence form. The average rate of each

Make a mixed plan for this problem by permitting backordered, X-Print Manuf...

X-Print Manufacturing makes laser printers. One plant assembles the PL-4000 model. Standards indicate that one worker can assemble five printers per day. This model costs about $35

Explain sql commands that are used for data manipulation, What is the role ...

What is the role of structure query language (SQL) in database object creation and information management in a relational database? Identify three SQL commands that are used for da

Explain what makes a constraint critical or active, 1) What makes a constra...

1) What makes a constraint critical or active? Explain. 2) Jim has used the theory of constraints to maximize the production of his active constraints and match the production r

Why companies are more interested in using intangible assets, Companies are...

Companies are now more and more interested in using intangible assets and human capital as a way to gain an advantage over competitors. True False

Write Your Message!

Captcha
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