Problem 6-12 Matching asset mix and financing plans (LO6-3]Colter Steel has $5,100,000 in assets.$ 2,200,000Temporary current assetsPermanent current assets1,560,0001,340,000$ 5,100,000Fixed assetsTotal assetsShort-term rates are 12 percent. Long-term rates are 17 percent. Earnings before interest and taxes are $1,080,000. The tax rate is 40percent.If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing,what will earnings after taxes be?Earnings after taxes

Given, Assets = $5,100,000 Short term rate = 12% Long term rate = 17% Earnings before interest and…

Answered: Colter Steel has $5,100,000 in assets.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Calculate the firm's initial net working capital. Calculate the firm's initial ratio of current assets to total assets. Critically evaluate THREE (3) advantages of commercial paper that usually used by the largest and most credit-worthy companies.
5. The original investment in a project was $64,197. The project has a life of ten years and the company requires a 10% rate of return on all investments. The annual net income was $24,464.1. $ 10,379 was the depreciation expense. What is the project's profitability index rounded to two decimal places?
Ohio Quarry Inc. has $20 million in assets. Its expected operating income (EBIT) is $4 million and its income tax rate is 40 percent. If Ohio Quarry finances 20 percent of its total assets with debt capital, the pretax cost of funds is 10 percent. If the company finances 40 percent of its total assets with debt capital, the pretax cost of funds is 15 percent. Round your answers to the questions below to two decimal places. Determine the rate of return on equity (ROE) under the three different capital structures (0, 20, and 40% debt ratios).0% debt ratio: % 20% debt ratio: % 40% debt ratio: % Which capital structure yields the highest expected ROE? yields the highest expected ROE. Determine the ROE under each of the three capital structures (0, 20, and 40% debt ratios) if expected EBIT decreases by 40 percent.0% debt ratio: % 20% debt ratio: % 40% debt ratio: % Which capital structure yields the highest ROE calculated in part c? yields the highest expected ROE.…
Last year Baron Enterprises had $250 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets? Select the correct answer. a. $127.6 b. $134.6 c. $148.6 d. $141.6 e. $155.6
Marcos has current annual sales of $52600 net fixed assets of $38900, and total asset s of 56300. Tje firm is currently operating at a 79percent capacity. What is the capital intensity ratio at full capacity?
Water and Power Co. (W&P) currently has $575,000 in total assets and sales of $1,400,000. Half of W&P’s total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 22% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is . (Note: Round your answer to the nearest whole number.) W&P was using its fixed assets at only 95% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? (Note: Round your answer to the nearest whole number.) $1,547,368 $1,768,421 $1,473,684 $1,694,737 When you consider that W&P’s fixed assets were being underused, its target fixed assets to sales ratio should be %. (Note: Round your answer to two decimal places.) When you consider that W&P’s fixed assets were being underused, how much fixed assets must W&P raise to…
H3. Please show proper step by step calculation
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?
Tri-States Gas Producers expects to borrow $800,000 for field engineering improvements. Two methods of debt financing are possible—borrow it all from a bank or issue debenture bonds. The company will pay an effective 8% per year to the bank for 8 years. The principal on the loan will be reduced uniformly over the 8 years, with the remainder of each annual payment going toward interest. The bond issue will be for 800 ten-year bonds of $1000 each that require a 6% per year dividend payment. (a) Which method of financing is cheaper after an effective tax rate of 40% is considered? (b) Which is the cheaper method using a before-tax analysis? Is it the same as the after-tax choice?
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Excel Online Structured Activity: Income and Cash Flow Analysis The Berndt Corporation expects to have sales of $11 million. Costs other than depreciation are expected to be 80% of sales, and depreciation expected to be $1.1 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $ b. Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow? Round your answer to the nearest…
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