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?Hii Tutor Give Answer this problem
- PQR 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.1. On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $740,000 of 4.5% U.S. Treasury bonds that mature in 14 years. The bonds could be purchased at face value. The following data have been assembled:Montclair Company is considering a project that will require a $520,000 loan. It presently has total liabilities of $210,000 and total assets of $630,000. 1. Compute Montclair's (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $520,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky? 1. (a) 1. (b) 2. 1 Choose Denominator: 1 1 1 If Montclair borrows the funds, does its financing structure become more or less risky? Choose Numerator: Debt-to-Equity Ratio
- Montclair Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000 and total assets of $620,000. 1. Compute Montclair’s (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $500,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky?Consider each of the following separate situations that arose in 20X1: a. Corporation G invested $71,000 in corporate bonds as a short-term investment. The year-end 20X1 market value of the bonds is $63,500. The bonds are measured at fair value every reporting date in FVTPL. b. Corporation A has the equivalent of C$ 201,000 cash in a bank in Elbonia. Elbonia's laws prohibit transferring the cash to the Canadian parent company. Corporation A has ongoing operations in Elbonia and uses the cash to run their operations in that country. c. Corporation B received $85,500 from a customer as advance payment for a specialized piece of manufacturing equipment that is anticipated to be delivered in 20X3. d. Corporation C has $810,000 in notes receivable from customers. The notes mature over a two-year period. The company normally sells its products on an instalment basis that requires payments over two years. e. Corporation D received an advance payment of $50,500 for an event that will be held…Eagle Sports Products (ESP) is considering issuing debt to raise funds to financeits growth during the next few years. The amount of the issue will be between$35 million and $40 million. ESP has already arranged for a local investmentbanker to handle the debt issue. The arrangement calls for ESP to pay flotationcosts equal to 4 percent of the total market value of the issue.a. Compute the flotation costs that ESP will have to pay if the market valueof the debt issue is $39 million.b. If the debt issue has a market value of $39 million, how much will ESP beable to use for its financing needs? That is, what will be the net proceedsfrom the issue for ESP? Assume that the only costs associated with the issueare those paid to the investment banker.c. If the company needs $39 million to finance its future growth, how muchdebt must ESP issue?
- 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.The Landers Corporation needs to raise $1.00 million of debt on a 25-year issue. If It places the bonds privately, the Interest rate will be 11 percent. Thirty thousand dollars in out-of-pocket costs will be incurred. For a public issue, the Interest rate will be 10 percent, and the underwriting spread will be 4 percent. There will be $100,000 in out-of-pocket costs. Assume Interest on the debt is paid semiannually, and the debt will be outstanding for the full 25-year period, at which time it will be repaid. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. For each plan, compare the net amount of funds initially available-Inflow-to the present value of future payments of Interest and principal to determine net present value, Assume the stated discount rate is 14 percent annually. Use 7.00 percent semiannually throughout the analysis. (Disregard taxes.) Note: Assume the $1.00 million needed…
