The W.C. Pruett Corp. has $300,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 10 %. In addition, it has $600,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $1.35 million, its average tax rate is 25%, and its profit margin is 2%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places. TIE: ROIC: % MPI Incorporated has $3 billion. assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 8%, and its return on assets (ROA) is 4%. What MPI's times-interest-earned (TIE) ratio? Do not round intermediate calculations. Round your answer to two decimal places. The Stewart Company has $780,500 in current assets and $304,395 in current liabilities. Its initial inventory level is $179,515, and it will raise funds additional notes payable and use them increase inventory. How much can its short-term debt (notes payable) increase without pushing i s current ratio below 2.0? Round your answer to the nearest dollar. $ Ingraham Inc. currently has $355,000 in accounts receivable, and its days sales outstanding (DSO) is 58 days. It wants to reduce its DSO to 35 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 10%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest dollar.
The W.C. Pruett Corp. has $300,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 10 %. In addition, it has $600,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $1.35 million, its average tax rate is 25%, and its profit margin is 2%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places. TIE: ROIC: % MPI Incorporated has $3 billion. assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 8%, and its return on assets (ROA) is 4%. What MPI's times-interest-earned (TIE) ratio? Do not round intermediate calculations. Round your answer to two decimal places. The Stewart Company has $780,500 in current assets and $304,395 in current liabilities. Its initial inventory level is $179,515, and it will raise funds additional notes payable and use them increase inventory. How much can its short-term debt (notes payable) increase without pushing i s current ratio below 2.0? Round your answer to the nearest dollar. $ Ingraham Inc. currently has $355,000 in accounts receivable, and its days sales outstanding (DSO) is 58 days. It wants to reduce its DSO to 35 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 10%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest dollar.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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Transcribed Image Text:The W.C. Pruett Corp. has $300,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 10%. In addition, it has $600,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred
stock. Its annual sales are $1.35 million, its average tax rate is 25%, and its profit margin is 2%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places.
TIE:
ROIC:
X
%
MPI Incorporated has $3 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 8%, and its return on assets (ROA) is 4%. What is MPI's times-interest-earned (TIE) ratio? Do not round intermediate calculations. Round your answer to
two decimal places.
$
The Stewart Company has $780,500 in current assets and $304,395 in current liabilities. Its initial inventory level is $179,515, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes
payable) increase without pushing its current ratio below 2.0? Round your answer to the nearest dollar.
Ingraham Inc. currently has $355,000 in accounts receivable, and its days sales outstanding (DSO) is 58 days. It wants to reduce its DSO to 35 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average
sales will fall by 10%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest dollar.
$
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