Exhibit 10.1Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plasticgrocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheetand some other information are provided below.Assets$38,000,000Net plant, property, and equipment $101,000,000Total assets$139,000,000Current assetsLiabilities and EquityAccounts payableAccruals$10,000,000$9,000,000$19,000,000Long-term debt (40,000 bonds, $1,000 par value) $40,000,000$59,000,000Common stock (10,000,000 shares)$30,000,000Retained earnings$50,000,000Total shareholders' equity$80,000,000$139,000,000Total liabilities and shareholders' equityThe stock is currently selling for $17.75 per share, and its noncallable $3,319.97 par value, 20-year, 1.70% bonds withsemiannual payments are selling for $881.00. The beta is 1.29, the yield on a 6-month Treasury bill is 3.50%, and the yieldon a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had anaverage annual return of 14.50% during the past 5 years. The firm's tax rate is 40%.Current liabilitiesTotal liabilitiesRefer to Exhibit 10.1. Which of the following is the best estimate for the weight of debt for use in calculating the WACC?Do not round your intermediate calculations.a.b. 16.56%C.d.18.64%e.17.23%17.92%17.57%

Capital structure of the company consists of debt and equity and cost of capital is weighted cost of…

Answered: Current liabilities $19,000,000…

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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Bramble Corp. reported the following balances at December 31, 2021: common stock $408,000, paid-in Capital in Excess of Par- common stock $106,000, and retained earnings $242,000. During 2022, the following transactions affected stockholders' equity. 1. 2. 3. 4. Issued preferred stock with a par value of $128,500 for $209,000. Purchased treasury stock (common) for $36,500. Earned net income of $135,000. Declared and paid cash dividends of $52,500. Prepare the stockholders' equity section of Bramble Corp's December 31, 2022, balance sheet.
Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $12.00 per share. Common Stock, $10 Par, 103,000 shares authorized, 58,000 shares issued and outstanding $580,000 Paid-in Capital in Excess of Par—Common 125,000 Retained Earnings 302,000 Total Stockholders' Equity $1,007,000 What would be the total stockholders' equity after a 15% common stock dividend?
Arabian Gulf Corporation reports the following stockholders' equity section on December 31, 2020. - Common stock; $10 par value; 500,000 shares authorized; 200,000 shares issued and outstanding - Paid in capital in excess of par value, common stock $ 2,000,000 ..400,000 900,000 ********** - Retained earnings. *************** Total $3,300,000 The Corporation completed the following transactions in 2021. 1- Jan. 10, Directors declared a $1 per share cash dividend payable on March 15 to the Jan. 31 stockholders of record. 2- Mar. 01, Purchased 10,000 shares of its own common for $15 per share. 3- Mar. 15, Paid the cash dividend declared on Jan. 10. 4- May 01, Sold 6,000 of its treasury shares at $15 cash per share. 5-Sep. 30, Directors declared a 30% stock dividend when the share market price is $16. 6- Nov. 01, Distributed stock dividends declared on Sep. 30. 7- Nov. 15. The company implemented 5-for-1 stock split for the common stock. Required: Prepare journal entries to record each of…
Ale Corporation had net income of $2,040,000 and paid dividends to common stockholders of $400,000 in 2020. The weighted average number of shares outstanding in 2020 was 600,000 shares. Ale Corporation's common stock is selling for $82 per share on the New York Stock Exchange. Ale Corporation's price-earnings ratio is a. 3.2 times. b. 16.0 times. C. 19 times. d. 12.7 times.
Problem 1 Burlington Corp. has a single class of shares. At its year end December 31, 2020, the company had 5,000,000 ordinary shares issued and outstanding. On the stock exchange, these shares were trading at around $7. In the company's accounts, these shares had a value of $50,000,000. The equity accounts also show $650,000 of contributed surplus from previous repurchases of shares as well as $30.000,000 of Retained Earnings. On January 15, 2021, Burlington repurchased and cancelled 250,000 shares at a cost of $7 per share. On August 20, 2021 the company repurchased and cancelled a further 475,000 shares at a cost of $14 per share. Required: Record the journal entries for the two share transactions in 2021.
Company B had net income for the fiscal year ended December 31, 2020 of $5 million. There were 500,000 common shares outstanding throughout 2020. The average market price of the common shares for the entire fiscal year was $50. Company tax rate was 25% for 2020. Company B had the following potential common shares outstanding during 2020: • Options to buy 100,000 common shares at $45 per share. • 100,000 convertible preferred shares entitled to a cumulative dividend of $10 per share. Each preferred share is convertible into 1.5 common shares. • 4% convertible bonds with a principal amount of $30 million, issued at par. Each $1,000 bond is convertible into 25 common shares. For the fiscal year ended December 31, 2020, what is the basic and diluted EPS using IFRS?
On June 30, 2021, when ABC Co. stock was selling for $65 each, the equity accounts had the following balances: Common Stock ($50 par value, 50,000 issued) $2,500,000 Capital Contributed in Excess of Par Value—Common Stocks 600,000 Retained Earnings 4,200,000 How much will the Common Stock account balance be after declaring and distributing a 100% stock dividend? a. $5,000,000. b. $7,300,000. c. $2,500,000.
Consider the following book value balance sheet of ABC, in which all figures are in million dollars. The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding. Assets Liabilities and Net Worth Cash and short-term securities $1 Bonds with coupon rate of 8% paid annualy, maturity of 10 years and the current yield to maturity of 9% $10 Account receivables $3 Preferred stock (par value $10 per share) $2 Inventories $7 Common stock $10 Plant and equipment $21 Retained earnings $10 Total $32 $32 a) What is the capital structure of the firm based on market values? b) The preferred stock pays a dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%, the risk-free rate is 4%, and the firm’s tax rate is 40%. ABC’s bonds have coupon rate of 6%, and currently are trading at par. What is the firm’s weighted average cost of capital (WACC)?…
Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for OMR 11.50 per share. Common stock, OMR 5 par, 100,000 shares authorized, 40,000 shares issued OMR 200,000 Paid in capital in excess of par—common 120,000 Retained earnings 290,000 Total stockholders' equity OMR 610,000 If the company declared and issued 10% stock dividend? What will the number of issued shares Select one: a. 20,000 shares b. 44,000 shares c. 40,000 shares d. 4,000 shares
The equity portions of a company's balance sheets for end of 2021 and 2022 are shown below: 2021 2022 $1,898,646 $3,818,440 $2,685,439 $6,714,937 $2,547,130 $7,242,627 Calculate the average price per share at which new shares were sold in 2022. Common Stock ($0.50 par) Capital Surplus Retained Earnings 0.78 1.55 0.50 O None of these options are correct 1.05
8. Andy Farmer Publications had the following results for the year ended December 31, 2022; Net Income - $1,500,000 Average Common Shares Outstanding - 1,000,000 On January 1, 2022 Andy Farmer Publication's issued 400,000 Stock Options with a two-year vesting period and a strike price of $10. The Company also had Convertible debt with a Face Value of $7,500,000 and an interest rate of 10% outstanding for all of 2022. Each $1,000 bond was convertible in to 40 shares of common stock. The tax rate was 30% and the average Fair Value of the Common Stock was $40 during the year. What amount should Andy Farmer Publications report as Diluted Earnings Per Share for the year ended December 31, 2022 (Round to the nearest penny)? $1.19 $1.27 $1.07 $1.15

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