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Q: The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is…
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Biogen Inc., as a biotechnology firm, had a beta of 1.70 in 1995. It had no debt outstanding at the end of that year.
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- Data on Shick Inc. for last year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365 day year. Do not round yourData on Shick Inc. for last year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year. Do not round your intermediate calculations. Sales $103, 000 Accounts receivable $16,000 Days Sales Outstanding (DSO) 56.699 Benchmarks' Days Sales Outstanding (DSO) 19.000 a. $9,805 b. $11,471 c. $10, 638 d. $4,529In November 2007, for example, General Motors (GM) announced that it would take a write-off of about $39 billion, meaning that it was reducing net income for the third quarter of the year by that amount. Discuss why General Motors’ stockholders probably didn’t suffer as a result of the reported loss. What do you think was the basis for our conclusion?Is it possible that I can get help with this? I am not understanding why it is wrong. I have attached an example of the correct solution. Futuristic Development (FD) generated $3 million in sales last year with assets equal to $6 million. The firm operated at full capacity last year. According to FD's balance sheet, the only current liabilities are accounts payable, which equals $480,000. The only other liability is long-term debt, which equals $1,035,000. The common equity section is comprised of 500,000 shares of common stock with a book value equal to $3 million and $1,485,000 of retained earnings. Next year, FD expects its sales will increase by 20 percent. The company's net profit margin is expected to remain at its current level, which is 16 percent of sales. FD plans to pay dividends equal to $0.60 per share. It also plans to issue 70,000 shares of new common stock, which will raise $460,000. Estimate the additional funds needed (AFN) to achieve the forecasted sales next…
- On 3/31/2020, Company ABC released its quarterly report, showing the sales in the first quarter had tumbled 30% as a pandemic hit. However, the stock price for company ABC went up by 3% right after the report was released. Does this mean a failure for the Market Efficient Theory?A financial analyst at your firm notes that the firm's total interest payments this year were $10 million while total debt outstanding was $80 million, and he concludes that the cost of debt was 12.5%. What is wrong with this conclusion? Only long term debt should be used Only current liabilities should be used Excluded taxes will overestimate the cost of debt Excluding taxes will underestimate the cost of debt None of the above are correctCisco Systems Inc. is a large provider of networking equipment, based in Silicon Valley, California. In August 2004, it released financial results for the quarter ended July 30, 2004. Its revenues increased by 26% over the same quarter of 2003. Its net income for the quarter was $1.4 billion or 21 cents per share, a 41% increase overthe same quarter in 2003 and 5% in excess of the average analysts’ forecast of 20cents. However, Cisco’s share price fell almost 18% to $18.29 following the announcement. This fall in share price seems contrary to the results of Ball &Brown [1968] and subsequent researchers, who have documented a positive market response to good earnings news. Analysis of other financial statement information revealed the following. Inventory turnover declined to 6.4 from 6.8 in 2003, gross margin declined slightly, order backlog was down and, while revenue was growing, its rate of growth appeared to declining. Also, several analysts commented on an increase in…
- Cisco Systems Inc. is a large provider of networking equipment, based in Silicon Valley, California. In August 2004, it released financial results for the quarter ended July 30, 2004. Its revenues increased by 26% over the same quarter of 2003. Its net income for the quarter was $1.4 billion or 21 cents per share, a 41% increase over the same quarter in 2003 and 5% in excess of the average analysts’ forecast of 20cents. However, Cisco’s share price fell almost 18% to $18.29 following the announcement. This fall in share price seems contrary to the results of Ball &Brown [1968] and subsequent researchers, who have documented a positive market response to good earnings news. Analysis of other financial statement information revealed the following. Inventory turnover declined to 6.4 from 6.8 in 2003, gross margin declined slightly, the order backlog was down and, while revenue was growing, its rate of growth appeared to decline. Also, several analysts commented on an increase in…Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio (Current Assets - Inventory)/Current Liabilities of 1.2. Your net income this year was $70.3 million. Your cash is $10.3 million, your receivables are $7.9 million, and your inventory is $4.9 million. You have current liabilities of $19.3 million. What is the maximum dividend you could pay (in cash and in stock) this year and still comply with your covenants? The maximum dividend would be $ million (Round to one decimal place.)Stevens Textiles’s 2010 financial statements are shown below: Suppose 2011 sales are projected to increase by 15% over 2010 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2011. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all additional debt is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings.Assume that the company was operating at full capacity in 2010, that it can not sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. What is the resulting total…
- Benchmark Metrics Inc. (BMI), an all-equity financed firm, reported EPS of $4.07 in 2008. Despite the economic downturn, BMI is confident regarding its current investment opportunities. But due to the financial crisis, BMI does not wish to fund these investments externally. The Board has therefore decided to suspend its stock repurchase plan and cut its dividend to $0.83 per share (vs. almost $2 per share in 2007), and retain these funds instead. The firm has just paid the 2008 dividend, and BMI plans to keep its dividend at $0.83 per share in 2009 as well. In subsequent years, it expects its growth opportunities to slow, and it will still be able to fund its growth internally with a target 45% dividend payout ratio, and reinitiating its stock repurchase plan for a total payout rate of 63%. (All dividends and repurchases occur at the end of each year.) Suppose BMI's existing operations will continue to generate the current level of earnings per share in the future. Assume further that…Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio (Current Assets−Inventory)/Current Liabilities of 1.2. Your net income this year was $69.7 million. Your cash is $10.3 million, your receivables are $8.4 million, and your inventory is $5.2 million. You have current liabilities of $18.6 million. What is the maximum dividend you could pay (in cash and in stock) this year and still comply with your covenants?Gilmore, Inc., had equity of $175,000 at the beginning of the year. At the end of the year, the company had total assets of $330,000. During the year, the company sold no new equity. Net income for the year was $37,000 and dividends were $5,000. a. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the sustainable growth rate if you use the formula ROE × b and beginning of period equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the sustainable growth rate if you use end of period equity in this formula? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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