Waldorf Company has two sources of funds: long-term debt with a market and book value of $5,300,000 issued at an interest rate of 12%, andequity capital that has a market value of $4,100,000 (book value of $2,100,000). Waldorf Company has profit centers in the following locations withthe following operating incomes, total assets, and current liabilities. The cost of equity capital is 12%, while the tax rate is 35%.Operating Income$480,000$620,000$1,020,000Current LiabilitiesAssets$2,000,000St. Louis$100,000$2,000,000$340,000Cedar RapidsWichita$6,000,000$600,000What is the EVAⓇ for Cedar Rapids? (Round intermediary calculations to four decimal places.)O A. $403,000OB. $460,142C. $210,400O D. $243,142...

NOPAT :— It stands for net operating profit after tax. It is calculated by deducting tax expense…

Answered: Waldorf Company has two sources of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The firm is capital structure is 30% of debts and 70% of equity. The cost of debt before–Tax is 3%, and the cost of equity is 10%. The income tax is 30%. Calculate the WACC. Select one: a. WACC=4.5% b. WACC=7.63% c. WACC=5.63% d. WACC=9.3%
Haricot Corporation and Pinto Corporation both have operating profits of $155 million. Haricot is financed solely by equity, while Pinto has issued $205 million of 5% debt. If the corporate tax rate is 21%:Required:How much tax does each company pay? What is the total payout to investors (debtholders plus shareholders) of each company?
Dickinson Company has $11,820,000 million in assets. Currently half of these assets are financed with long-term debt at 9.1 percent and half with common stock having a par value of $8. Ms. Park, Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 9.1 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a $2,955,000 million long-term bond would be sold at an interest rate of 11.1 percent and 369,375 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 369,375 shares of stock would be sold at $8 per share and the $2,955,000 in proceeds would be used to reduce long-term debt. a. Compute earnings per share considering the current plan and the two new plans. Note: Round your answers to 2 decimal places. Current Plan Plan D Plan E Earnings per…
The balance sheet of Colton corporation shows long term debt of $50 million Shareholders equity of $50 million While the income statements shows ebit of $14.1 million and interest expenses of $5 million If Colton has a tax bracket of 40% what is the roe?
P&G has the following capital structure: $2 million in debt, $5 million in preferred stock and $7 million in equity. If the company’s before-tax cost of debt is 6%, cost of preferred stock is 9% and cost of equity is 15%, what is weighted average cost of capital (in %) for P&G? Assume that P&G’s tax rate is 30%. WACC = ____________%
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…
Merritt stone works is all - equity financed and has net sales of $217,800, taxable income of $32,600 a return on assets of 11.5percent, a tax rate of 21 percent and rotal debt of $63, 700. What are the value for the three components of the DuPont Identity?
Tool Manufacturing has an expected EBIT of $74,000 in perpetuity and a tax rate of 21 percent. The company has $131,500 in outstanding debt at an interest rate of 6.8 percent and its unlevered cost of capital is 13 percent. What is the value of the company according MM Proposition I with taxes? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Company value
Rivera Corporation has an operating income of $3 million and a tax rate of 32%. Capital invested is $12 million and the after-tax percentage cost of capital is 9%. Determine the economic value added (EVA) of the company.
Cha Cha Corporation has three long term loans (interest bearing debt): a loan of $100,000 at 6% interest, a loan of $100,000 at 8% interest, and a loan of $100,000 at 14% interest. The company has accounts payable of $50,000 (non-interest bearing) and equity of $200,000. It estimates that its cost of equity is 12%. Its tax rate is 35%. A. What is Cha Cha Corporation’s weighted average after tax cost of interest-bearing debt? B. What is Cha Cha Corporation’s weighted average cost of capital on interest bearing debt and equity?
Duffert Industries has total assets of $970, 000 and total current liabilities (consisting only of accounts payable and accruals) of $115,000. Duffert finances using only long-term debt and common equity. The interest rate on its debt is 9% and its tax rate is 25%. The firm's basic earning power ratio is 17% and its debt - to capital rate is 40% What are Duffert's ROE and ROIC? Do not round your intermediate calculations. Group of answer choices a. 12.68%; 14.03% b.13.63%; 14.46% с 10.90%; 12.44% d. 15.54%; 16.06% e. 8.86%; 12.73%

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