The Diligence Corporation is considering a plant expansion that will increase its sales and netincome. The following data represent management's estimate of the impact the proposal willhave on the company:CurrentProposedCashP 120,000P 140,000Accounts payable360,000450,000Accounts receivable400,000550,000Inventory360,000420,000Marketable securities180,000180,000Mortgage payable (current)160,000310,000Fixed assets2,300,0003,200,000Net income400,000550,000The effect of the plant expansion on Salter's net working capital will be a(n) [Answer shouldbe in this format: INCREASE OF P1000]

The net working capital: A company needs to make additional investments in inventories, needs to…

The Diligence Corporation is considering a plant expansion that will increase its sales and net income. The following data represent management's estimate of the impact the proposal will have on the company: Current Proposed Cash P 120,000 P 140,000 Accounts payable 360,000 450,000 Accounts receivable 400,000 360,000 550,000 Inventory 420,000 Marketable securities 180,000 180,000 Mortgage payable (current) 160,000 310,000 Fixed assets 2,300,000 3,200,000 Net income 400,000 550,000 The effect of the plant expansion on Salter's net working capital will be a(n) [Answer should be in this format: INCREASE OF P10001

The Diligence Corporation is considering a plant expansion that will increase its sales and net income. The following data represent management's estimate of the impact the proposal will have on the company: Current Proposed Cash P 120,000 P 140,000 Accounts payable 360,000 450,000 Accounts receivable 400,000 360,000 550,000 Inventory 420,000 Marketable securities 180,000 180,000 Mortgage payable (current) 160,000 310,000 Fixed assets 2,300,000 3,200,000 Net income 400,000 550,000 The effect of the plant expansion on Salter's net working capital will be a(n) [Answer should be in this format: INCREASE OF P10001

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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You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment Answer is complete but not entirely correct. 1 $ 74 24 a. Total value i b. Laputa's equity 50 15 18 326 652 € Year 2 $94 $ 189 34 60 18 21 39 70 21 24 From year 5 onward,EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 17%, its debt yields 8 %, and it pays corporate tax at 30%. 4 $ 114 44 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the…
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A company begins with the following simple balance sheet: $10 million in real assets; $1 million cash; $5.5 million each in owners’ equity and debt. Which of the following actions will decrease a company’s leverage ratio? Choose two Use half of the cash from the balance sheet to purchase equipment Borrow an additional $1 million and purchase equipment Raise an additional $1 million in equity to purchase equipment Raise an additional $1 million in equity to pay off debt
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A company is considering a $166,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Net Cash Flow $10,000 $28,000 $55,000 $42,000 $111,000 (a) Compute the net present value of this investment.(b) Should the machinery be purchased?
Edmonds Industries is forecasting the following income statement: Sales Operating costs excluding depreciation & amortization EBITDA Depreciation and amortization EBIT Interest $6,000,000 3,300,000 $2,700,000 300,000 $2,400,000 480,000 EBT $1,920,000 Taxes (25%) 480,000 $1,440,000 Net Income The CEO would like to see higher sales and a forecasted net income of $2,720,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 6%. The tax rate, which is 25%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $2,720,000 in net income? Round your answer to the nearest dollar, if necessary. $
According to your book Financial Management for Small Businesses, 2nd OER Edition, Explain why the statement of cash flows provides useful information that goes beyond income statement and balance sheet data?
Budget Wings Airlines is considering upgrading its fleet of aircraft as it expands from a regional airline to one offering service to a more nationwide portfolio of cities and airports. In support of this process, the CFO has asked you to determine the appropriate weighted average cost of capital (WACC) to use in the discounted cash flow analysis. You spend the morning gathering the following information: - Budget Wings has debt outstanding with a market value of $150 million. This debt is in the form of bonds that are currently priced at $946.33 per $1,000 face value and pay a coupon of 3.45%. The current yield-to-maturity (YTM) on these bonds is 4.11%. - Budget Wings stock is currently priced at $54.41 per share. You expect that next year's dividend will be $3.75 and you expect dividends to grow at 3%. The current market value of Budget Wings' common equity is $240 million. - Budget Wings has preferred equity outstanding with a market value of $30 million that offers an annual…
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Grey Manufacturing was considering a major expansion of its manufacturing operations. To raise the needed funds Grey's management has decided to simply use the firm's present capital structure as follows: • SOURCE OF CAPITAL AMOUNT OF RUND AFTER TAX COST OF RAISES CAPITAL Debt 80,000 5.20% Common stock 120,000 14.50% Total 200,000 What is your estimate Grey's WACC?

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