Digital Press and Book Publishers Ltd had the following balance sheets as at Dec. 31, 2012DIGITAL ($'000) BOOK PUB. LTD ($'000)100,00080,000120,000200,000Current AssetsFixed Assets (Net)Total Assets100,000200,000Current LiabilitiesLT DebtCommon StockRetained EarningsTotal Lia & EquityEBIT for both firms = $30M and tax rate is 40%20,00080,00050,00050,000200,00080,00020,00050,00050,000200,000What is the ROE for each firm if interest rate on current liabilities is 10% and the rate on LT debt is 13%Which firm is in a riskier position? WhyIf ST rate rises to 20% and LT rate rises to 16% but the rate on existing LT debt remains unchanged. What would the ROE for Digital Press andBook Publishers Ltd be.

Return on equity is a financial metric that helps in evaluating the profitability position of a…

Digital Press and Book Publishers Ltd had the following balance sheets as at Dec. 31, 2012 DIGITAL ($'000) BOOK PUB. LTD ($'000) 100,000 80,000 100,000 120,000 200,000 200,000 Current Assets Fixed Assets (Net) Total Assets Current Liabilities LT Debt Common Stock Retained Earnings Total Lia & Equity 20,000 80,000 50,000 50,000 200,000 EBIT for both firms = $30M and tax rate is 40% 80,000 20,000 50,000 50,000 200,000 What is the ROE for each firm if interest rate on current liabilities is 10% and the rate on LT debt is 13% If ST rate rises to 20% and LT rate rises to 16% but the rate on existing LT debt remains unchanged. What would the ROE for Digital Press and Book Publishers Ltd be. Which firm is in a riskier position? Why

Digital Press and Book Publishers Ltd had the following balance sheets as at Dec. 31, 2012 DIGITAL ($'000) BOOK PUB. LTD ($'000) 100,000 80,000 100,000 120,000 200,000 200,000 Current Assets Fixed Assets (Net) Total Assets Current Liabilities LT Debt Common Stock Retained Earnings Total Lia & Equity 20,000 80,000 50,000 50,000 200,000 EBIT for both firms = $30M and tax rate is 40% 80,000 20,000 50,000 50,000 200,000 What is the ROE for each firm if interest rate on current liabilities is 10% and the rate on LT debt is 13% If ST rate rises to 20% and LT rate rises to 16% but the rate on existing LT debt remains unchanged. What would the ROE for Digital Press and Book Publishers Ltd be. Which firm is in a riskier position? Why

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

See similar textbooks

Similar questions

Here is a simplified balance sheet for Locust Farming: Locust Farming Balance Sheet ($ in millions) Current assets Long-term assets $ 42,529 46,842 Current liabilities Long-term debt Other liabilities Equity $ 29,750 27,757 14,327 17,537 $ 89,371 Total $ 89,371 Total Locust has 662 million shares outstanding with a market price of $88 a share. a. Calculate the company's market value added. b. Calculate the market-to-book ratio. c. How much value has the company created for its shareholders as a percent of shareholders' equity, that is, as a percent of the net capital contributed by shareholders? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the company's market value added. Note: Enter your answers in millions. Market value Market value added million million
Durable Plastics Company had the following total assets, liabilities, and equity as of December 31. Total Assets Total Liabilities Total Equity $440,000 133,000 307,000 What is the company's debt ratio as of December 31? (Round your percentage answer to two decimal places.) OA. 30.23% OB. 43.32% O C. 100.00% O D. 69.77%
From the following information compute the following ratios:d) Debt to Equity Ratioe) Proprietary Ratio
Comparative balance sheets at the end of 2004 and 2005 of OASIS LIMITED appear below: OASIS LIMITED Comparative Balance Sheets Assets 31, Dec 2004 31 Dec 2005 Cash and Bank Balance 50,000 45,000 Marketable Securities 40,000 25,000 Accounts Receivable 320,000 330,000 Merchandise Inventory 240,000 235,000 Plant & Equipment (net) 600,000 640,000 Total 1250,000 1275,000 Liabilities & Shareholder's Equity Accounts Payable 150,000 160,000 Accrued Expenses 60,000 45,000 Mortgage Loan (long term) — 70,000 Debenture Payable (due 2010) 500,000 350,000 Ordinary Share Capital 160,000 160,000 Retained Earnings 380,000 490,000 Total 1250,000 1275,000 Additional information: Net income for the year amounted to Rs. 250,000 Cash dividends of Rs 140,000 were declared and paid. Depreciation of plant and equipment for the year was Rs. 60,000 Marketable securities costing Rs. 15,000 were sold Rs. 35,000 cash. INSTRUCTIONS Prepare a cash flow statement using indirect method for the year ended…
Data pertaining to the current position of Forte Company follow: Cash $440,000 Marketable securities 175,000 Accounts and notes receivable (net) 335,000 Inventories 700,000 Prepaid expenses 44,000 Accounts payable 180,000 Notes payable (short-term) 230,000 Accrued expenses 290,000 Required: 1. Compute (A) the working capital, (B) the current ratio, and (C) the quick ratio. Round ratios to one decimal place. 2. Compute the working capital, the current ratio, and the quick ratio after each of the following transactions and record the results in the appropriate columns of the table provided. Consider each transaction separately and assume that only that transaction affects the data given. Round ratios to one decimal place. A. Sold marketable securities at no gain or loss, $80,000. B. Paid accounts payable, $120,000. C. Purchased goods on account, $130,000. D. Paid notes payable, $105,000. E. Declared a cash dividend, $140,000. F. Declared a…
Marin Company provides you with the following condensed balance sheet information: Assets Current assets $ 41,700 Equity investments 60,000 Equipment (net) 227,600 Intangibles 55,500 Total assets $384,800 Liabilities and Stockholders’ Equity Current and long-term liabilities $96,400 Stockholders’ equity Common stock ($5 par) $ 19,700 Paid-in capital in excess of par 107,300 Retained earnings 161,400 288,400 Total liabilities and stockholders’ equity $384,800 For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.)(a) Marin declares and pays a $0.55 per share cash dividend. (1) Total assets $…
The balance sheet for Solomon Corporation follows: Current assets $ 237,000 Long-term assets (net) 752,000 Total assets $ 989,000 Current liabilities $ 156,000 Long-term liabilities 450,000 Total liabilities 606,000 Common stock and retained earnings 383,000 Total liabilities and stockholders’ equity $ 989,000 Required Compute the Debt-to-assets ratio
The following data apply to Bright-Side Condos Ltd. (millions of dollars): Cash and Marketable Securities Fixed Assets Sales Net Income Quick Ratio Current Ratio Days Sales Outstanding Return On Equity $100 $283.50 $1,000.0 $50.00 2.0X 3.0X 40 days 12% Compute the company's (1) accounts receivable (2) current liabilities (3) current assets, (4) total assets, (5) Return On Assets, (6) common equity, and (7) long-term debt.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS