in 20x2, C Co's total liabilities were $10,742 million and shareholders' equity was $8403 million, In 20x2, P Co's total liabilties were $16.259 million andtheir shareholders' equity was $6,401 milion. Which of the following statements is false?Multiple ChoiceP Co is a much higher leveraged company providing greater financial risk for investors but potential higher retut on owners investment toIts shareholdesC Co's debt to equity ratio was 1.28 and P Co's was 2.54C Co has only about 561% of its assets financed by debt while P Co has about 71.8% of assets financed by debtC Co is more profitable than P Co

Debt and equity form the company’s capital structure or how it finances its operations. Debt and…

Answered: P Co is a much higher leveraged company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Corporate Finance Company A and Company B’s revenues and variable expenses (e.g. COGS) are identical, butA’s fixed expenses (e.g. SG&A) are smaller than B’s (see table below). Assuming the size of theirrevenues are 100% correlated with the strength of the economy, would A’s equity Beta be smaller,the same, or larger than B’s equity beta? Explain why. Strength of economy: Weak Economy Strong EconomyCompany A B A BRevenues 150 150 180 180Variable Expenses 20 20 30 30Fixed Expenses 20 100 20 100EBT 110 30 130 50
Consider two firms – Alpha Co. and Omega Co. – that operate in the manufacturing of mountain bikes and have the same degree of operating leverage. Alpha Co. and Omega Co. have, respectively, no debt and 50 percent debt in their capital structure. Which of the following statements is most accurate? Compared to the Alpha Co., the Omega Co. has: a. the same sensitivity of net income to changes in operating income. b. a lower sensitivity of net income to changes in unit sales. c. the same sensitivity of operating income to changes in unit sales.
None
Alpha Co. has a debt-equity ratio of 0.6, a pretax cost of debt of 7.5 percent, and an unlevered cost of equity of 12 percent. What is Alpha's cost of equity if you ignore taxes? Multiple choice question. 16.5% 9.3% 14.7% 12% Explain why
glenboro fire prevention corp has a profit margin of 7.70% total asset turn over of 1.90 and roe of 19.17%. what is this firm debt equity ratio?
Roxy Broadcasting, Inc. is currently a low-levered firm with a debt-to-equity ratio of 2/7. The company wants to increase its leverage to 7/2 for debt to equity. If the current return on assets is 10% and the cost of debt is 8%, what are the current and the new costs of equity if Roxy operates in a world of no taxes?
An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the aftertax cost of debt is 9.00 percent, and the cost of common equity (in the form of retained earnings) is 17.00 percent. b. Recalculate the firm's weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Debt Common equity Weighted average cost of capital Weighted Cost % 0.00 %
CO A has cash flows of $0.76 per share, earnings of $1.25 per share and 115,000 shares outstanding. Co B. is a comparable public company with a price of $60 per share, cash flows of $2.14 per share, and 510,000 shares outstanding. If Co Bis a sufficiently comparable company, what do you estimate Co B. price per share to be? Assume: Risk free rate 4% Market risk premium 7% Cost of debt 4%, beta of debt is 0. Tax rate 23%
K1
Bruichladdich Distillery has a debt/asset ratio of 0.55. The firm's equity multiplier is?
Please explain the photo attached, thank you!
Compare the following two companies. California Corp • Net income margin = 10% • Asset turnover = 3.00 • Financial leverage = 2.00 Indiana Corp • Net income margin = 40% • Asset turnover = 1.00 !3! • Financial leverage = 0.50 Which of the following statements are true? California Corp has relied on equitý to finance its assets more than Indiana Corp has California Corp has a lower return on equity than Indiana Corp OCalifornia Corp has a higher return on equity than Indiana Corp California Corp generates more sales for every dollar of assets than does Indiana Corp

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