Hii expert please given answer general accounting Summit Corporation has an EBIT of $3,600,000 andinterest expense of $600,000. Calculate its Degreeof Financial Leverage (DFL).a. 6.0b. 1.2c. 0.167d. Not enough information

Step 1: Define Degree of Financial Leverage (DFL)The Degree of Financial Leverage (DFL) measures how…

Answered: Summit Corporation has an EBIT of…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 2MC

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Consider the following data for the firms Acme and Apex: Acme Apex Required: Equity Debt ($ million) ($ million) 210 1,050 105 350 ROC Cost of Capital (*) (%) 17% 9% 15% 10% a-1. Calculate the economic value added for Acme and Apex. a-2. Which firm has the higher economic value added? b-1. Calculate the economic value added per dollar of invested capital for Acme and Apex. b-2. Which firm has the higher economic value added per dollar of invested capital? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B1 Required B2 Calculate the economic value added for Acme and Apex. Note: Enter your answers in millions rounded to 2 decimal places. Economic value added for Acme million Economic value added for Apex million
i) PAT - 4000 Cr ii) Tangible Fixed Assets -3300 Cr iii) Depreciation 8.5 % iv) Identifiable Intangible other than brand -1200 Cr v) Risk Premium – 5 % vi) Return from Market is 10 % vii) Beta of the company –Double the market viii) Tax rate – 20 % ix) Debenture Interest Rate is 9 % ) Debt : Equity is in the ratio of 3:2 xi) Expected normal return on Tangible Assets ( Weighted Average Cost of capital + 25 % of the Cost of Debt Post Tax xii ) Appropriate Capitalization rates for Intangibles – 22 % Determine the possible value of Brand as per Potential Earnings Model
Which of the following calculations is correct if sales are $25,000, operating profit after tax is $1,000, the tax rate is 30%, there are no ‘other comprehensive income’ items, operating liabilities (OL) are $5,000, the short-term borrowing rate (STBC) is 3% after tax, and the asset turnover ratio (ATO) is 2? 1. Operating liability leverage (OLLEV) = 0.286 2. RNOA = 0.092 3. RNOA = 0.066 4. Operating profit margin after tax = 0.046
Here are data on two firms: Equity ($ million) ROC (%) Cost of Capital (%) Debt ($ million) Аспе 140 60 16 10 Арех 440 160 14 11 a-1. Calculate the economic value added? (Do not round intermediate calculations. Enter your answers in millions) Acme Aрех Economic value added milion milion
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Ef 17.Can you please provide the explanation, formula and correct answer for the problem above?
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Assume that cost of debt = 8%; unlevered cost of capital = 10%; systematic risk of the asset is 1.5. What are the values of the unlevered and levered firms?
H5. Use the following information to find the external financing needed (EFN): Current sales: $6,000; Current costs: $3,000; Total Assets: $20,000; Total Debt: $8,000; Total equity: $12,000; Projected sales: $9,600. Total assets and costs are proportional to sales. The firm does not plan to distribute any dividends. The level of debt and equity is independent of the level of sales. Options: A) $3,200 B) $1,450 C) $8,800 D) $7,200 E) $12,000
Consider the following data for the firms Acme and Apex: Equity ($ million) Debt ($ million) ROC Cost of Capital Acme 290 145 17% 9% Apex 1,450 483 15% 10% a. Calculate the economic value added for Acme and Apex (round to 2 decimal places). Economic value added for Acme $? million Economic value added for Apex $? million b. Calculate the economic value added per dollar of invested capital for Acme and Apex (round to 2 decimal places)? Economic value added for Acme per dollar Economic value added for Apex per dollar
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Summit Corporation has an EBIT of $3,600,000 and interest expense of $600,000. Calculate its Degree of Financial Leverage (DFL). a. 6.0 b. 1.2 c. 0.167 d. Not enough information