Expert solve the question financial accounting Colter Steel has $5,100,000 in assets.Temporary current assets $2,200,000Permanent current assets 1,560,000Fixed assetsTotal assets1,340,000$5,100,000Assume the term structure of interest ratesbecomes inverted, with short-term rates goingto 12 percent and long-term rates 3 percentagepoints lower than short-term rates. Earningsbefore interest and taxes are $1,080,000. Thetax rate is 40 percent.If long-term financing is perfectly matched(synchronized) with long-term asset needs, andthe same is true of short-term financing, whatwill earnings after taxes be?

Step 1: Define Financing Working CapitalOne of the strategies used by a firm to finance its capital…

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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

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ISBN:9781337514835

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Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 5P

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Colter Steel has $4,550,000 in assets. Temporary current assets $ 1,100,000 Permanent current assets 1,505,000 Fixed assets 1,945,000 Total assets $ 4,550,000 Assume the term structure of interest rates becomes inverted, with short-term rates going to 13 percent and long-term rates 2 percentage points lower than short-term rates. Earnings before interest and taxes are $970,000. The tax rate is 20 percent. 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?
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The entity has an unsecured overdraft of R20000 at prospect Bank that carries an interest rate of 22% per annum. In which one of the following statement will this item be shown? A.Statement of financial position as a current liability B.Statement of financial position as a non current liability C.Statement of income and expenditure as finance costs C.Statement of financial position as current asset
Exxon-Mobil's receipts and disbursements are shown below. Calculate the future worth in year 7 at an interest rate of 8% per year. Year Cash Flow, S -6,000 1 5,000 2 4,000 3 5,000 4 5,000 -1,000 7,000 7 8,000 O $31,023.34 O S18,101.82 O $19,998.37 O 331,312.27
On Jan, 1, 20X1 ABC Corp sold equipment with a cost of P20,000,000 and accumulated depreciation of P7,000,000 in exchange for cash of P500,000 and non-interest bearing note receivable of P8,000,000 due in 4 equal annual installments starting on Dec 31, 20X1. Effective rate was 12% for this type of note. PV of P1 at 12% for 4n = .63552 PV of ordinary annuity of P1 at 12% for 4n = 3.03735 How much is the carrying amount of the note at Dec 31, 20X1? 1,271,036 1,423,560 1,785,714 3,380,103
Using Table 11-1, calculate the compound amount and compound interest (in $) for the investment. (Round your answers to the nearest cent.) Principal TimePeriod (years) NominalRate (%) InterestCompounded CompoundAmount CompoundInterest $8,000 4 15 annually $ $
The financial statements of Stone Limited for the most recent two years is shown below. Extract from statement of profit or loss for the year ended 30 April 2019 2018 £'000 £'000 224,000 195,000 (169,200) (136,500) 54,800 58,500 (32,700) (38,040) (10,900) (12,680) (1.900) 9,300 Revenue Cost of sales Gross profit Administrative costs Distribution cost Finance cost-loan note interest Statement of financial position as at 30 April. Assets Non-current assets Current assets: Inventory Trade receivables Cash balance Total assets Equity and liabilities Ordinary share capital Retained earnings £'000 2019 12,800 24,600 1,600 £'000 37,000 39,000 76,000 16,000 26,200 42,200 (1.380) 6,400 2018 £'000 £'000 28,600 9,800 21,600 2,400 33,800 62.400 16,000 18,600 34,600
Using Table 11-1, compute the amount of compound interest (in $) earned in 1 year and the annual percentage yield (APY) for the investment. (Round your answers to two decimal places.) Principal NominalRate (%) InterestCompounded Compound InterestEarned in 1 Year Annual PercentageYield (APY) $6,000 12 semiannually $ %
Eagle Bank has the following interest-sensitive assets and interest-sensitive liabilities. Amount maturing in Amount maturing in 30 days (million) 570 330 116 Interest-sensitive assets Loans Securities 30 days (million) 810 63 Interest rate on interest-sensitive assets is 5% Interest rate on interest-sensitive liabilities is 3% Interest-sensitive liabilities Savings deposits Time deposits Money market The interest rate is expected to rise 1% (for both interest-sensitive assets and liabilities) 30 days later. Will Eagle Bank benefit from the interest rate rise? Explain your answer. Show your calculations.
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Lever Age pays a(n) 8% rate of interest on $10.6 million of outstanding debt with face value $10.6 million. The firm’s EBIT was $1.6 million. a. What is times interest earned? (Round your answer to 2 decimal places.) Times interest earned b. If depreciation is $260,000, what is cash coverage? (Round your answer to 2 decimal places.) Cash coverage c. If the firm must retire $360,000 of debt for the sinking fund each year, what is its “fixed-payment cash-coverage ratio” (the ratio of cash flow to interest plus other fixed debt payments)? (Round your answer to 2 decimal places.) Fixed-payment cash-coverage ratio
|ıl 12. Colter Steel has $5,250,000 in assets. Temporary current assets. Permanent current assets. Fixed assets. Total assets. $2,500,000 1,575,000 1,175,000 $5,250,000 Short-term rates are 9 percent. Long-term rates are 14 percent. Earnings before interest and taxes are $1,110,000. The tax rate is 40 percent. 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? For a graphical example of perfectly matched plans, see Figure 6-5. Impact of term structure of interest rates on financing plans (LO6-4) 13. In Problem 12, assume the term structure of interest rates becomes inverted, with short-term rates going to 11 percent and long-term rates 5 percentage points lower than short-term rates. If all other factors in the problem remain unchanged, what will earnings after taxes be?

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