s Consider the figures below:Net Current Assets = $100Net Fixed Assets = $200Long Term Debt = $150Equity = $150Sales = $1000Costs = $800Taxes = $62Assume that costs and assets increase at the same rate as sales, but debt and equity do not. Also assume that 71.9% ofnet income is paid out in dividends, and the firm's fixed assets are being used at FULL capacity. The tax rate is constant. Ifthe company does not wish to issue any new equity or debt, what is the maximum growth rate in sales that they canachieve?[Keep at least 3 decimal places for all intermediate steps. Express your final answer with 2 decimal places (ie. 55555.55and NO COMMAS)]Maximum Growth Rate:%

Net current assets = $100Net fixed assets = $200Long term debt = $150Equity = $150Sales = 1000Costs…

Answered: Consider the figures below: Net Current…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 8QE

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A firm had a debt ratio of 0.85. The pretax cost of debt is 8% and the reqiured return on asset is 15.5%. What is the cost of equity if we factorin the firms tax rate of 24%? A) 19.53 B) 18.92 C) 21.57 D) 20.35 E) 20.96
Which statement is correct?a. The cost of debt is determined by taking the present value of the interest payments and principal times one minus the tax rate.b. The difference in computing the cost of capital between using the accumulated profits and issuance of new ordinary shares is the growth rate.c. Increase in flotation costs, increase in the company’s beta and increase in the expected inflation will all lead to d. increase the company’s weighted average cost of capital.e. Increasing the company’s dividend payout would mitigate the company’s need to raise new ordinary shares.f. none of the above
Suppose a firm has the following information: Sales = $10million; costs of goods sold (excluding depreciation) = $5 million;depreciation = $1.4 million; other operating expenses = $2 million;interest expense = $1 million. If the tax rate is 25%, what is NOPAT,the net operating profit after taxes? ($1.2 million)
You are given the financial information for the Unic Company: Earnings Before Interest and Tax (EBIT) = $126.58 Corporate tax rate (TC) = 0.21 Debt (D) = $500 Unlevered cost of capital (RU) = 0.20 The cost of debt capital is 10 percent. Question: Determine the value of Unic Company equity? Determine the cost of equity capital for Unic Company? Determine the WACC for Unic Company?
b)Assume that Angostura is currently operating at fullcapacity. All costs/expenses/income and net working capital vary directly withsales/revenue.Interest Expenses will remainunchanged. The tax rate and the dividend pay-out ratiowill remainconstant.How much additional debt is required, if any, if no new equity is raised and sales/revenue are projected to increaseby10% c) Pro forma statement
The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?
It is known that a firm’s Net Operating Profit After Tax (NOPAT) is $58,000 and its Economic Value Added (EVA) is $18,000. What is the firm’s Weighted Average Cost of Capital (WACC) if its debt is $150,000 and equity is $250,000?
Give typing answer with explanation and conclusion Suppose Abraxas Corp. has an equity cost of capital of 8.2%, market capitalization of $11.37 billion, and an enterprise value of $17.12 billion. Suppose Abraxas's debt cost of capital is 5.6% and its marginal tax rate is 21%. What is Abraxas's WACC?
You have the following data for your company. Market Value of Equity: $520 Book Value of Debt: $130 Required rate of return on equity: 12% Required rate of return on debt (pre-tax): 7% Corporate tax rate: 25% The company's debt is assumed to be is reasonably safe, so the book value of debt is a reasonably approximation for the market value of debt. What is the weighted average cost of capital for this company?
Assume that a company borrows at a cost of 0.08. Its tax rate is 0.35. What is the minimum after-tax cost of capital for a certain cash flow if a. 100 percent debt is used? b. 100 percent common stock? (assume that the stockholders will accept 0.08)
Ch 18) Suppose Alcatel-Lucent has an equity cost of capital of 10.1%, market capitalization of $11.52 billion, and an enterprise value of $16 billion. Suppose Alcatel-Lucent's debt cost of capital is 5.7% and its marginal tax rate is 33% a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is 8.34 % (Round to two decimal places.) b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, The NPV of the project is $87.51 million. (Round to two decimal places.) c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? The debt capacity of the…
Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95 billion, and an enterprise value of $15 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.9% and its marginal tax rate is 38%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here,? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 FCF ($ million) - 100 50 Print C Done 2 99 3 66 X

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