Please need answer the general accounting question Wagner Industrial Motors, which is currently operating at full capacity, has salesof $2,450, current assets of $790, current liabilities of $480, net fixed assets of$1,640, and a 5 percent profit margin. The firm has no long-term debt and doesnot plan on acquiring any. The firm does not pay any dividends. Sales are expectedto increase by 10 percent next year. If all assets, short-term liabilities, and costsvary directly with sales, how much additional equity financing is required for nextyear?a. $12.25b. $245.00c. $257.25d. $182.75e. $60.25

Step 1: Define Equity FinancingEquity financing is considered for the new issue of shares or any new…

Answered: Wagner Industrial Motors, which is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 7P

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Wagner Industrial Motors, which is currently operating at full capacity, has sales of $2,340, current assets of $680, current liabilities of $370, net fixed assets of $1,530, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 10 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year? $172.30 $245.70 $234.00 $55.30 $11.70
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Fujita, Incorporated, has no debt outstanding and a total market value of $222,000. Earnings before interest and taxes, EBIT, are projected to be $18,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 25 percent higher. If there is a recession, then EBIT will be 30 percent lower. The company is considering a $60,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,400 shares outstanding. The company has a tax rate of 21 percent, a market-to-book ratio of 1.0, and the stock price remains constant. a-1. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. Note: A negative answer should be indicated by a minus sign. Do…

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