(Liquidity Analysis) The King Carpet Company has $3,150.000 in cash and a total of $12,480,000 in curent assets. The firm's current liabilities equal $6,670,000 such that the firm's cument ratio equals 1.9 The company's managers want to reduce the firm's cash holdings down to $1,040,000 by paying $556.000 e cash to expand the fem's truck feet and using $1,554,000 in cash to retire a short temnote if they carry this plan through what will happen to the firm's current rato? The new current ratio is (Round to one decimal place)

(Liquidity Analysis) The King Carpet Company has $3,150.000 in cash and a total of $12,480,000 in curent assets. The firm's current liabilities equal $6,670,000 such that the firm's cument ratio equals 1.9 The company's managers want to reduce the firm's cash holdings down to $1,040,000 by paying $556.000 e cash to expand the fem's truck feet and using $1,554,000 in cash to retire a short temnote if they carry this plan through what will happen to the firm's current rato? The new current ratio is (Round to one decimal place)

Name: (Liquidity Analysis) The King Carpet Company has $3,150.000 in cash a
Uploaded: 2024-03-20T06:33:21.000Z
Channel: Bartleby
Description: (Liquidity Analysis) The King Carpet Company has $3,150.000 in cash and a total of $12,480,000 in curent assets. The firm's current liabilities equal 56,670,000 such that the firm's current ratio equals 1.9.The company's managers want to reduce the

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

The King Carpet Company has $3,010,000 in cash and a total of $12,110,000 in current assets. The firm's current liabilities equal $5,630,000 such that the firm's current ratio equals 2.2 The company's managers want to reduce the firm's cash holdings down to $1,180,000 by paying $560,000 in cash to expand the firm's truck fleet and using $1,270,000 in cash to retire a short-term note. If they carry this plan through, what will happen to the firm's current ratio? The new current ratio is ? (round 2 decimals)
Check my work Consider a firm with an EBIT of $866,000. The firm finances its assets with $2,660,000 debt (costing 8 percent and is all tax deductible) and 560,000 shares of stock selling at $5.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $1,000,000 by selling an additional 360,000 shares of stock. The firm's tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $866,000. Calculate the change in the firm's EPS from this change in capital structure. (Do not round intermediate calculations and round your final answers to 2 decimal places.) EPS before EPS after Difference
Banque du Langenberg holds $575 million interest producing assets earning a net interest margin (NIM) of 2.50%. The iniital net interest income is thus $14.375 million. The bank's President pursues a strategy of holding longer dated, higher risk assets while also increasing leverage and as a result the net interest margin expands by 25 basis points (or 10% on 2.50%) and the total asset base increases by 20%. What is the new net interest income? Original scenario Net interest margin Total assets (millions) 1.00% $2 Rise in nim 3.0% Rise in total assets 3.0% Original New scenario Scenario Net interest margin 1.00% 1.03% Total assets $2 $2 Rise in nim 3.0% Rise in total assets 3.0% Net interest income $0.020 $0.021
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Green Moose Industries has no debt in its capital structure and has $300 million in assets. Its sales revenues last year were $210 million with a net income of $10 million. The company distributed $1.55 million as dividends to its shareholders last year. What is the firm’s self-supporting, growth rate? (Note: Do not round your intermediate calculations.) 2.90% 0.61% 4.00% 0.52% Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm must issue the same number of new common shares that it issued last year. Common stock is the firm’s only form of equity.…
Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm’s total corporate value (in millions)? Do not round intermediate calculations. Year 1 2 Free Cash flow -$30 $195 a. $3,413 million b. $2,901 million c. $3,044 million d. $2,743 million e. $2,643 million
Consider a firm with an EBITDA of $1,100,000 and an EBIT of $1,000,000. The firm finances its assets with $4,640,000 debt (costing 8.4 percent, all of which is tax deductible) and 214,000 shares of stock selling at $12 per share. To reduce risk associated with this financial leverage, the firm is considering reducing its debt by $2,640,000 by selling additional shares of stock. The firm’s tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $1,000,000. Calculate the EPS before and after the change in capital structure and indicate changes in EPS.
Consider a firm with an EBITDA of $1,100,000 and an EBIT of $1,000,000. The firm finances its assets with $4,650,000 debt (costing 8.6 percent, all of which is tax deductible) and 216,000 shares of stock selling at $18 per share. To reduce risk associated with this financial leverage, the firm is considering reducing its debt by $2,700,000 by selling additional shares of stock. The firm's tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $1,000,000. Calculate the EPS before and after the change in capital structure and indicate changes in EPS. (Do not round intermediate calculations. Round your answers to 2 decimal places.) EPS before EPS after Changes in debt $ $ $ 2:19 1.80 0:40
Based on a discounted free cash flow method, you have estimated the value of a firm to be $270 million. The company has $110 million of long-term debt outstanding (common equity comprises the rest). There are 14.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?
Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 4.0% after Year 2, then what is the firm’s total corporate value (in millions)? Do not round intermediate calculations. Year0 FCF -$40 Year 1 FCF $150
Softek Corporation forms a separate legal entity, Startek, to develop new technology. The entity is funded by $2,000,000 in outside equity and $26,000,000 in debt. Softek guarantees Startek's debt. The entity is expected to generate the following cash flows at the end of two years: Cash Flow Probability $14,520,000 0.50 42,350,000 0.20 60,500,000 0.30 A discount rate of 10 percent is appropriate. Required Assume qualitative analysis of Startek's VIE status is inconclusive. Quantitatively analyze whether Startek is a variable interest entity. Instructions: Use negative signs with your answers, when appropriate. • Enter $ answers in millions ($11,000,000 equals $11 million). • Enter Probability answers using decimals. Expected Present Cash Flow Value Probability Expected Investment Residual Expected Fair Value Returns S PV Gains $ $ Expected Losses
A company has EBIT of $30 million, depreciation of $5 million, and a 40% tax rate. It needsto spend $10 million on new fixed assets and $15 million to increase its operating currentassets. It expects its accounts payable to increase by $2 million, its accruals to increase by$3 million, and its notes payable to increase by $8 million. The firm’s current liabilities consistof only accounts payable, accruals, and notes payable. What is its free cash flow?
Reynolds Construction's current value of operations is $750 million based on the free cash flow valuation model. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, and $300 million of total debt. What is the best estimate for the firm's value of equity, in millions?.

SEE MORE QUESTIONS

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