The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $20,000,000 bond issuance, the electric mixer division used $14,000,000 and the electric lamp division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. Which corporate costs should be allocated to divisions?
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- Solve this QuestionWilderness World (WW) needs to raise $84 million in debt. To issue the debt, WW must pay its underwriter a fee equal to 3% of the issue. The company estimates that other expenses associated with the issue will total $487,000. If the face value of each bond is $1,000, how many bonds must be issued to net the needed $84 million?Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs to support future operations. MM's investment banker will charge flotation costs of 2.5% of the total amount issued to help MM raise the funds. In addition, MM will incur other costs associated with the issue that equal $500,000. The market value of each bond at issue time will be $1,000. How many bonds must GM sell to net $175 million that it needs?
- Hii Tutor Give Answer this problemPQR Corporation is considering the following alternative plans of financing for raising$4,000,000: The following additional information is available for PQR Corporation: Earnings before bond interest and income taxes (EBIT) are $9,000,000. The tax rate is 35%. All bonds or stocks are issued at their par values. Interest is payable at the end of each year. Required: Which plan should company choose & why (i.e. Explain the rationale behind selecting the plan)? Provide all the detailed calculations.Three different plans for financing an $80,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income: Please see the attachment for details: Instructions1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $10,000,000.2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,000,000.3. Discuss the advantages and disadvantages of each plan.
- Olivia Hawkins is evaluating a bond investment in Westlake Company. She is concerned about the corporation’s ability to make future interest payments. Determine the company’s time’s interest earned ratio if the company has operating income before interest and taxes of $12,235 million and interest expense of $1,025 million and interpret it.Coldstream Corp. is comparing two different capital structures. Plan I would result in 10,000 shares of stock and $100,000 in debt. Plan II would result in 5,000 shares of stock and $200,000 in debt. The interest rate on the debt is 6 percent. a. Assuming that the corporate tax rate is 40 percent, compare both of these plans to an all-equity plan assuming that EBIT will be $60,000. The all-equity plan would result in 15,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan I $ Not attempted Plan II $ Not attempted All equity $ Not attempted d-2 Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) EBIT Plan I and all-equity $ Not attempted Plan II and all-equity $ Not attempted…Binomial Tree Farm's financing includes $5 million of bank loans. Its common equity is shown in Binomial's Annual Report at $6.67 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $18 per share. What debt ratio should Binomial use to calculate its company cost of capital or asset beta? Note: Enter your answer as a percent rounded to 2 decimal places. Debt ratio %
- Waldorf Company has two sources of funds: long-term debt with a market and book value of $5,300,000 issued at an interest rate of 12%, and equity capital that has a market value of $4,100,000 (book value of $2,100,000). Waldorf Company has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 12%, while the tax rate is 35%. Operating Income $480,000 $620,000 $1,020,000 Current Liabilities Assets $2,000,000 St. Louis $100,000 $2,000,000 $340,000 Cedar Rapids Wichita $6,000,000 $600,000 What is the EVAⓇ for Cedar Rapids? (Round intermediary calculations to four decimal places.) O A. $403,000 OB. $460,142 C. $210,400 O D. $243,142 ...Dickson Corporation is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $100,050 in debt. Plan II would result in 9,800 shares of stock and $226,200 in debt. The interest rate on the debt is 10 percent. C. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $70,000. The all-equity plan would result in 15,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) d-1. Assuming that the corporate tax rate is 21 percent, what is the EPS of the firm? (Do not round intermediate calculations and round your answers to 2 decimal…Jewel Regal Cars (JRC) must raise $240 million to support operations. To do so, JRC plans to issue new bonds. Investment bankers have informed JRC that the flotation costs will be 4% of the total amount issued. If the market value of each bond is $1,000, how many bonds must JRC sell to net the $240 million that it needs? There are no other issuing expenses or fees in the offering.
