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
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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.
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