The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $23,550,000 bond issuance, the electric mixer division used $15,350,000 and the electric lamp division used $8,200,000 for expansion. Interest costs on the bond totaled $1,930,000 for the year. Which corporate costs should be allocated to divisions?
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- Solve this QuestionThe 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?
- Companies U and L are identical in every respect except that U is unlevered while L has $20 million of 8% bonds outstanding. Assume: (1) All of the MM assumptions are met. (2) Both firms are subject to a 25% federal-plus-state corporate tax rate. (3) EBIT is $3 million. (4) The unlevered cost of equity is 12%. What value would MM now estimate for each firm? Company U:Company L: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…am. 115.
- Companies U and L are identical in every respect except that U is unlevered while L has $20 million of 8% bonds outstanding. Assume: (1) All of the MM assumptions are met. (2) Both firms are subject to a 25% federal-plus-state corporate tax rate. (3) EBIT is $3 million. (4) The unlevered cost of equity is 12%. What is rs for Firm U?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…
- 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…Waldorf Company has two sources of funds: long−term debt with a market and book value of $5,200,000 issued at an interest rate of 13%, and equity capital that has a market value of $4,200,000 (book value of $2,400,000). 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 13%, while the tax rate is 35%. Operating Income Assets Current Liabilities St. Louis $480,000 $2,600,000 $110,000 Cedar Rapids $600,000 $4,000,000 $300,000 Wichita $1,020,000 $6,000,000 $600,000 What is the EVA® for St. Louis? (Round intermediary calculations to four decimal places.) BIG HINT: The Weighted Average Cost of Capital (WACC) is 10.48% or .1048Companies U and L are identical in every respect except that U is unlevered while L has $20 million of 8% bonds outstanding. Assume: (1) All of the MM assumptions are met. (2) Both firms are subject to a 25% federal-plus-state corporate tax rate. (3) EBIT is $3 million. (4) The unlevered cost of equity is 12%. What is the WACC for Firm U? % What is the WACC for Firm L? %