42. The manager of Stock Division projects the following for next year:Sales$185,000Operating incomeOperating assetsThe manager can invest in an additional project that would require $40,000 investment inadditional assets and would generate $6,000 of additional income. The company's minimum rate$60,000$375,000of return is 14%.What is the residual income for Stock Division without the additional investment? *$6,000$7,500$40,000$6,200$6,600

Residual income: It can be defined as the leftover income or profits of the business after providing…

Answered: 42. The manager of Stock Division…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount after taxes. The company is currently in the process of projecting its financial needs and has made the following assumptions (projections): - Current Assets will equal 8% of sales, and fixed assets will remain at their current level of $1million. - Common equity is currently $0.6million (made up entirely of Retained earnings), and the company pays out half of its after-tax earnings in dividends. - The company has short-term payables that normally equal 7% of sales each and it has no long-term debt outstanding. What are the company’s financing needs for the coming year?
Sales are 150,000. COGS are 100,000. SG&A Overhead is 20,000. Depreciation is 15,000. Interest Expense is 10,000. Capital Expenditures is 15,000. Net Working Capital is not expected to rise by 1,000. The tax rate is 20%. What is FCF?
Vijay
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $50,000 2 35,000 3 30,000 4 20,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment. a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 20%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. c. If the opportunity cost of capital is 10%, what is the project's NPV? d. What is the project IRR?
A firm retains earnings of $40,000. What is the total external financing needed if this company, with $120,00 O in assets, has projected a growth rate of 8 percent? Multiple Choice Zero $3,200 $30,400 $9,600 $100,00 0
man.2
ABC company has a budgeting project. Machinery costs $60,000,000 with a 6 year life. Sales are $50,000,000 each year for 6 years. Cost of goods sold is $30,000,000 a year with depreciation expense. Marginal Tax Rate is 30%. What is the NPV of the project if the cost of capital is 12%? What is the IRR?
A company has a capital employed of P 200,000. It has a cost of capital of 12% per year. Its residual income is P 36,000. What is the company’s return on investment? a. 30% b. 12% c. 18% d. 22%
An investment with total costs of $10,000 will generate total revenues of $11,000 for one year. Management thinks that since the investment is profitable, it should be made. Do you agree? What additional infromation would you want? If funds cost 12 percent, what would be your advice to management? Would your answer be different if the cost of capital is 8 percent?
Please answer the following MCQs and T or Fs from 30 till 34
Assume the hiking shoes division of the all about shoes corporation had the following results last year (in thousands). Managements target rate of return is 15% and the weighted average cost of capital is 25%, it's effective tax rate is 30%.
a project fixed cost of $55,000 per year. The operating cash flow at 7,550 units is $56,900. Ignore taxes. what will be the new degree of operating leverage if the number of units sold rises to 9,445?

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