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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- 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?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.Wilderness 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?
- XYZ Corporation, whose tax rate is 30%, has two operating divisions, the Mandaue division and the Balamban division, with the following financial data for the current year: Mandaue Division Balamban Division Total Assets P475,000,000 P550,000,000 Current Liabilities P140,000,000 P110,000,000 Operating Income P52,750,000 P60,000,000 The company has a weighted-average cost of capital of 9.12%. What is Economic Value Added (EVA) for the Mandaue Division? P1,872,000 P22,198,000 P6,373,000 D6 395 000Great 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?Dark Creek Corporation's CEO is selecting between two mutually exclusive projects. The company is obligated to make a $3,700 payment to bondholders at the end of the year. To minimize agency cost, the firm's bondholders decide to use a bond covenant to stipulate that the bondholders can demand an additional payment if the company chooses to take on the high-volatility project. How much additional payment to bondholders would make stockholders indifferent between the two projects? Cash flows pertaining to the two projects are shown in the table below. Economy Probability Low-Volatility Project Payoff High-Volatility Project Payoff $2,900 $4,000 4,800 Bad 40 Good .60 6,300 O $1366.67 O $1166.67 O $1300.00 O $1233,33hh.2