Last year Rennie Industries had sales of $255,000, assets of $175,000 (which equalstotal invested capital), a profit margin of 5.3%, and an equity multiplier of 1.2. The CFObelieves that the company could reduce its assets by $51,000 without affecting eithersales or costs. The firm finances using only debt and common equity. Had it reduced itsassets by this amount, and had the debt/total invested capital ratio, sales, and costsremained constant, how much would the ROE have changed? Do not round yourintermediate calculations.4.23%3.35%3.39%3.81%4.69%

Assets turnover ratio shows the efficieny of the company and it shows how much sales have generated…

Last year Rennie Industries had sales of $255,000, assets of $175,000 (which equals total invested capital), a profit margin of 5.3%, and an equity multiplier of 1.2. The CI believes that the company could reduce its assets by $51,000 without affecting eithe sales or costs. The firm finances using only debt and common equity. Had it reduced. assets by this amount, and had the debt/total invested capital ratio, sales, and costs remained constant, how much would the ROE have changed? Do not round your intermediate calculations. 4.23%

Last year Rennie Industries had sales of $255,000, assets of $175,000 (which equals total invested capital), a profit margin of 5.3%, and an equity multiplier of 1.2. The CI believes that the company could reduce its assets by $51,000 without affecting eithe sales or costs. The firm finances using only debt and common equity. Had it reduced. assets by this amount, and had the debt/total invested capital ratio, sales, and costs remained constant, how much would the ROE have changed? Do not round your intermediate calculations. 4.23%

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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Plank’s Plants had net income of $10,000 on sales of $40,000 last year. The firm paid a dividend of $2,300. Total assets were $700,000, of which $350,000 was financed by debt. a. What is the firm’s sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) b. If the firm grows at its sustainable growth rate, how much debt will be issued next year? (Do not round intermediate calculations.) c. What would be the maximum possible growth rate if the firm did not issue any debt next year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Meyer Inc's total invested capital is $610,000, and its total debt outstanding is $185,000. The new CFO wants to establish a total debt to total capital ratio of 55%. The size of the firm will not change. How much debt must the company add or subtract to achieve the target debt to capital ratio?
The Dog House has sales of $502,000, and depreciation of $47,000. The firm is entirely equity-financed and has a profit margin of 5% and tax rate of 35%. What is the amount of the operating cash flow?
Last year, a company had $355,000 in assets, $26,275 of net income, and a debt-to-total-assets ratio of 44%. Now suppose the newly hired CFO convinces the president to increase the debt ratio to 58%. Sales and total assets will not be affected, but interest expenses would increase. However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and therefore keep net income unchanged. What was the original return on equity (ROE) for this company?
Beranek Corp has $800,000 of assets (which equal total invested capital), and it uses no debt—it is financed only with common equity. The new CFO wants to employ enough debt to raise the total debt to total capital ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio? a. $571,429 b. $320,000 c. $1,120,000 d. $160,000 e. $480,000
Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-capital ratio was 17.5%. The firm finances using only debt and common equity, and its total assets equal total invested capital. Based on the DuPont equation, what was the ROE? Do not round your intermediate calculations. O a. 9.49% O b. 11.52% O c. 9.21% O d. 7.74% O e. 9.86%
a. Last year Harrington Inc. had sales of $654,000 and a net income of $89,000, and its year-end assets were $270,000. The firm's total-debt-to-total-capital ratio was 45.0%. The firm finances using only debt and common equity and its total assets equal total invested capital. Based on the DuPont equation, what was the ROE?

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