LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant? a. 7.57% b. 7.95% c. 8.35% d. 8.76% e. 9.20%
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- Burger Corp has $500,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $600,000, and its net income after taxes was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would Burger need in order to achieve the 15% ROE, holding everything else constant?Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $550,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant? Do not round your intermediate calculations. a. 10.13% b. 10.64% c. 10.23% d. 8.59% e. 9.92%Wail Inc. is currently a firm that has 2 million shares of stock outstanding with a market price of $25 a share and outstanding debt of $30 million. The debt interest rate is 10%. Its cost of equity is 17 percent and the tax rate is 35 percent. For some reason related to one of the controlling shareholders’ preference, the company wants to get rid of all its debt. After recapitalization, what is the cost of equity?
- New Doors Corp. has $375,000 of total assets, and it uses $187,500 of total shareholder's equity capital. Its sales for the last year were $520,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity (ROE) up to 15.0%. What profit margin (PM) would the firm need in order to achieve the 15% ROE, holding everything else constant? 1. 10.71% 2. 5.41% 3. 9.41% 4. 12.66% 5. 8.11%7. J Peterman Corp. has $425,000 of assets, and it does not use any debt to finance their operations. Peterman's sales for the last year were $625,000, and its net income was $50,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 20%. What profit margin would the firm need in order to achieve the 20% ROE, holding everything else constant? (2 points)13. Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $595,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?
- Hominy, Inc., has debt outstanding with a face value of $5 million. The value of the firm if it were entirely financed by equity would be $18.15 million. The company also has 420,000 shares of stock outstanding that sell at a price of $33 per share. The corporate tax rate is 21 percent. What is the decrease in the value of the company due to expected bankruptcy costs? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) Financial distress costsHominy, Inc., has debt outstanding with a face value of $5 million. The value of the firm if it were entirely financed by equity would be $18.2 million. The company also has 430, 000 shares of stock outstanding that sell at a price of $33 per share. The corporate tax rate is 22 percent. What is the decrease in the value of the company due to expected bankruptcy costs? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e. g., 1,234,567.)Last year Rosenberg Corp. had $195, 000 of assets, S18,775 of net income, and a debt-to-total-assets ratio of 32%. Now suppose the new CFO convinces the president to increase the debt ratio to 48%. 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 thus keep net income unchanged. By how much would the change in the capital structure improve the ROE? Question 5 options: 4.36% 4.57% 4.80% 5.04%
- Supercool Inc is currently an unlevered firm with 1,000 shares outstanding. It expects to generate $1,600 in EBIT in perpetuity. The tax rate is 45%. All earnings after tax are paid out as dividends. The firm is considering a capital restructuring for which the company will issue $3,000 of debt to buy back shares. Its cost of debt is 10%. Unlevered firms in the same industry have a cost of equity of 20%. The capital restructuring is going to take place in one month after its announcement. What is the share price of Supercool in the day before and after the restructuring completion? Before: $4.4; After $4.4 Before: $5.75; After $4.4 Before: $4.4; After $5.75 Before: $5.75; After $5.75Wail Inc. is currently a firm that has 2 million shares of stock outstanding with a market price of $25 a share and outstanding debt of $30 million. The debt interest rate is 10%. Its cost of equity is 17 percent and the tax rate is 35 percent. For some reason related to one of the controlling shareholders' preference, the company wants to get rid of all its debt. After recapitalization, what is the value of the firm? $90,500,000 $50,000,000 $69,500,000 O $80,000,000 $30,000,000Love, Inc. has a debt ratio of 25%. Management is wondering if tis current capital structure is too conservative. Love, Inc. Present EBIT is P3.0 million, and profits available to common shareholders are P1,680,000 with 457,143 shares common stock outstanding. If the firm were to instead have a debt ratio of 45%, additional interest expense would cause profits available to stockholders to decline to P1,560,000 but only 342, 857 common shares would be outstanding. What is the difference in Earnings per share at a debt ratio of 45% versus 25%
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