Hii Tutor Give Answer this problem The Hassan Corporation has an electric mixer divisionand an electric lamp division. Of a $23,550,000 bondissuance, the electric mixer division used $15,350,000and the electric lamp division used $8,200,000 forexpansion. Interest costs on the bond totaled$1,930,000 for the year. Which corporate costs shouldbe allocated to divisions?

Explanation of Bond Issuance:Bond issuance refers to a process in which a corporation borrows money…

Answered: The Hassan Corporation has an electric…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 6P

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Which corporate costs should be allocated to division
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,500,000 and the Electric Lamp Division used $3,500,000 for expansion. Interest costs on the bond totaled $975,000 for the year. What amount of interest costs should be allocated to the Electric Mixer Division? (Round any intermediary calculations two decimal places and your final answer to the nearest dollar.)
Springfield Corporation, whose tax rate is 30%, has two sources of funds: long-term debt with a market value of $8,400,000 and an interest rate of 8%, and equity capital with a market value of $14,000,000 that commands a 7-point premium. Springfield has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year: Total Assets Operating Income Blue Division $9,500,000 $1,059,000 Gold Division $12,900,000 $1,200.000 What is Economic Value Added (EVA) for the Blue Division?
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Great Corporation has two divisions- the Rad Division and the Club Division. The interest rate on Great's s $61 million (market value) of long-term debt is 10 percent. The company's tax rate is 40 percent. The cost of Great's equity capital is 15 percent. The market value of Great's equity is $87 million. The divisions' total assets, current liabilities, and before-tax operating income for last year are as follows: Before-Tax Current Division Total Assets Operating Liabilities Income Rad $97,000,000 $5,200,000 $ 20,600,000 Club 65,800,000 3,800,000 18,700,000 Required: For the Rad Division only: (i) Calculate the Return on Investment (ROI) percentage. Show workings. (ii) Calculate the Residual Income amount. (Minimum required rate is 12%.) Show workings. (iii) Calculate the economic value added (EVA) amount. Show workings.
All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian’s $400 million debt is 9 percent, and the company’s tax rate is 30 percent. The cost of All-Canadian’s equity capital is 12 percent. Moreover, the market value of the company’s equity is $600 million. (The book value of All-Canadian’s equity is $430 million, but that amount does not reflect the current value of the company’s assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadian’s three divisions. Division Before-Tax OperatingIncome CurrentLiabilities TotalAssets Pacific 14 $6 70 $ $ Plains 45 5 300 Atlantic 48 9 480 Compute the economic value added (or EVA) for each of the company's three divisions. (Do not round intermediate…
All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian’s $400 million debt is 9 percent, and the company’s tax rate is 30 percent. The cost of All-Canadian’s equity capital is 12 percent. Moreover, the market value of the company’s equity is $600 million. (The book value of All-Canadian’s equity is $430 million, but that amount does not reflect the current value of the company’s assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadian’s three divisions. Compute the economic value added (or EVA) for each of the company's three divisions. (Do not round intermediate calculations. Enter your final answers in dollars and not millions.)
All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian’s $400 million debt is 9 percent, and the company’s tax rate is 30 percent. The cost of All-Canadian’s equity capital is 12 percent. Moreover, the market value of the company’s equity is $600 million. (The book value of All-Canadian’s equity is $430 million, but that amount does not reflect the current value of the company’s assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadian’s three divisions. Division Before-Tax OperatingIncome CurrentLiabilities TotalAssets Pacific $ 14 $ 6 $ 70 Plains 45 5 300 Atlantic 48 9 480 Compute All-Canadian’s weighted-average cost of capital (WACC). (Do not round intermediate calculations. Round your…
Alpha Resources has sales revenue of $800,000, operating costs of $400,000, and depreciation expense of $20,000. The company has $300,000 of outstanding bonds that pay 5% interest and it faces an average state-plus-federal tax rate of 40%. What is its net income?
Paintbrush Valley State Bank has just submitted its Report of Condition and Report of Income to its principal supervisory agency. The bank reported net income before taxes and securities transactions of $37 million and taxes of $8 million. If its total operating revenues were $950 million, its total assets $2.7 billion, and its equity capital $250 million, determine the following for Paintbrush Valley: Tax management efficiency ratio. Expense control efficiency ratio. Asset management efficiency ratio. Funds management efficiency ratio. ROE. Alternative Scenarios: Suppose Paintbrush Valley State Bank experienced a 20 percent rise in net before-tax income, with its tax obligation, operating revenues, assets, and equity unchanged. What would happen to ROE and its components? If total assets climb by 20 percent, what will happen to Paintbrush’s efficiency ratio and ROE? What effect would a 20 percent higher level of equity capital have upon Paintbrush’s ROE and its components?
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…

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