Colter Steel has $5,250,000 in assets.Temporary current assets.Permanent current assetsFixed assetsTotal assets$ 2,500,0001,575,000.1,175,000$ 5,250,000Assume short-term interest rates are 10 percent and long-term rates are 4 percentage points lower than short-term rates. Earningsbefore 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?Earnings after taxes

Earning after tax can be calculated by using below equation.Earning after Tax( EAT) =( EBIT…

Answered: Colter Steel has $5,250,000 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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It is December 31. Last year, Galaxy Corporation had sales of $80,000,000, and it forecasts that next year's sales will be $86,400,000. Its fixed costs have been-and are expected to continue to be-$44,000,000, and its variable cost ratio is 10.00 %. Galaxy's capital structure consists of a $15 million bank loan, on which it pays an interest rate of 12%, and 5,000,000 shares of outstanding common equity. The company's profits are taxed at a marginal rate of 35%. The following are the two principal equations that can be used to calculate a firm's DFL value: DFL (at EBIT = $X) = Given this information, complete the following sentences: Percentage Change in EPS Percentage Change in EBIT Consider the following statement about DFL, and indicate whether or not it is correct. 0 0 DFL (at EBITSX) = • The company's percentage change in EBIT is . The percentage change in Galaxy's earnings per share (EPS) is • The degree of financial leverage (DFL) at $86,400,000 is. (Hint: Use the changes in EPS…
5.-DO IT IN EXCEL, AND SHOW THE FORMULASThe company purchases a machine, its cost of $726,000 will be financed with a loan at 13.8% interest for three years that requires equal semi-annual payments (annuities) that include principal and interest. What is the amount of the payment? A) $185,674.92 B) None of these amounts C) $311,662.137 D) $151,841.86 (Choose one option) D) $151,841.86
The following are the assets and liabilities of a government security dealer Assets $150 million 30-day Treasury bills $275 million 91-day treasury bills $90 million 180-day municipal notes $350 million 2-year Treasury notes Liabilities $575 million 14-day repurchase agreements $290 million 1-year commercial paper $425 million 30-day repurchase agreements Use the repricing model to determine the funding gap for a maturity bucket of 91 days a. -$150 million O b. -$60 million O c. -$250 million O d. -$575 million
A company receives a 5-year $100 million loan commitment from Wells Fargo at a fixed rate of 4.5%. The up-front commitment fee is 40 basis points and the unused portion of the loan is charged 15 basis points.     The bank borrows a total of $45 million at the beginning of the year and none thereafter. The following is true, except: A The interest paid on the drawdown amount for the full year is $2,025,000.                                                          B The interest rate paid on the drawdown amount for the full year is 4.90%                                                          C The fee for the loan commitment for the full year is $400,000.                                                D The fee for the unused portion of the loan commitment for the full year is $82,500
Titusville Petroleum Company is considering pledging its receivables to finance an increase in working capital. Citizens National Bank will lend the company 85 percent of the pledged receivables at 3 percentage points above the prime rate (currently 6%). The bank charges a service fee equal to 1.4 percent of the pledged receivables. The interest costs and the service fee are payable at the end of the borrowing period. Titusville has $2 million in receivables that can be pledged as collateral. The average collection period is 40 days. Assume that there are 365 days per year. Determine the annual financing cost to Titusville of this receivables-backed loan. Round your answer to two decimal places.   %
From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year   Cash Flow ($ million)   0 -59 1 4 2 5 3 6 4 7.33 5 8 6 8.25 Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV.Use interest rate 17%
Last year, Cayman Corporation had sales of $26 million, total variable costs of $15 million, and total fixed costs of $5,000,000. In addition, they paid $4 million in interest to bondholders. Cayman has a marginal tax rate of 21 percent. If Cayman's sales increase by 15%, what should be the increase in operating income?
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10
Allen Mfg., Inc., is currently operating at only 92 percent of fixed asset capacity. Current sales are $780,000. How fast can sales grow before any new fixed assets are needed? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Maximum sales growth %
Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $21 million in long-term debt. What is the debt ratio? Do not round intermediate calculations. Round your answer to the nearest whole number.
A corporation has decided to use borrowed capital to finance a portion of an equipment purchase. The equipment will be partially financed by borrowing $40,000 on a 2-year contract at 7% interest compounded annually, with the loan to be repaid in two equal EOY installments. The average inflation rate during this period is expected to be 2%. Determine the loan payment amount.
Assume that a firm issues $500,000,000 of U.S. commercial papers (and therefore uses a 360-day year for CP calculations) with a 30-day maturity at a discount of 0.5%. The annualized dealer fee is 0.175% and the cost of a backup line of credit is 0.25%. a. What is the amount of usable funds? b. What is the amount of dealer fee? c. What is the amount of backup line of credit? d. What is the annualized cost of the paper?

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