Evergreen Inc's most recent Statement of Financial Position is given below. Evergreen Inc. Statement of Financial Position As at Dec 31, 2021 Assets Liabilities Cash $ 425,000 Accounts Payable 300,000 Accounts Receivable $ 400,000 Other Current Liabilities 425,000 Inventories 500,000 Total Current Liabilities 725,000 Total Current Assets $ 1,325,000 Net Fixed Assets 18,000,000 LT Debt $ 2,500,000 Common Stock (85,000 shares o/s) 4,500,000 Retained Earnings 11,600,000 Total Liabilities & Total Assets $ 19,325,000 Owners Equity 19,325,000 Additional Information: • Current market price per common share = $ 195 Before tax cost of borrowing (secured loan) = 5% Weighted Average Cost of Capital =12% Net Income for 2021 = $925,000 • Target D/E ratio based on market values = 0.25 Corporate tax rate = 35% %24

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
icon
Related questions
icon
Concept explainers
Topic Video
Question
Evergreen Inc's most recent Statement of Financial Position is given below.
Evergreen Inc.
Statement of Financial Position
As at Dec 31, 2021
Assets
Liabilities
Cash
425,000
Accounts Payable
300,000
Accounts Receivable $
400,000
Other Current Liabilities
425,000
Inventories
500,000
Total Current Liabilities
2$
725,000
Total Current Assets $
1,325,000
Net Fixed Assets
18,000,000
LT Debt
$
2,500,000
Common Stock (85,000 shares o/s)
$
4,500,000
Retained Earnings
11,600,000
Total Liabilities &
Total Assets
$
19,325,000
Owners Equity
19,325,000
Additional Information:
Current market price per common share = $ 195
Before tax cost of borrowing (secured loan) = 5%
Weighted Average Cost of Capital =12%
Net Income for 2021 = $925,000
Target D/E ratio based on market values = 0.25
Corporate tax rate = 35%
Suppose instead, Evergreen uses a retention
ratio of 30%. Their capital budget
for the upcoming year = $1,600,000. Calculate
the debt, external equity
financing required and the dividends per share.
Transcribed Image Text:Evergreen Inc's most recent Statement of Financial Position is given below. Evergreen Inc. Statement of Financial Position As at Dec 31, 2021 Assets Liabilities Cash 425,000 Accounts Payable 300,000 Accounts Receivable $ 400,000 Other Current Liabilities 425,000 Inventories 500,000 Total Current Liabilities 2$ 725,000 Total Current Assets $ 1,325,000 Net Fixed Assets 18,000,000 LT Debt $ 2,500,000 Common Stock (85,000 shares o/s) $ 4,500,000 Retained Earnings 11,600,000 Total Liabilities & Total Assets $ 19,325,000 Owners Equity 19,325,000 Additional Information: Current market price per common share = $ 195 Before tax cost of borrowing (secured loan) = 5% Weighted Average Cost of Capital =12% Net Income for 2021 = $925,000 Target D/E ratio based on market values = 0.25 Corporate tax rate = 35% Suppose instead, Evergreen uses a retention ratio of 30%. Their capital budget for the upcoming year = $1,600,000. Calculate the debt, external equity financing required and the dividends per share.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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