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Loose Leaf for Fundamental Accounting Principles
23rd Edition
ISBN: 9781259687709
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Question
Chapter 14, Problem 7BTN
To determine
Particulars
Interest rate 10%
Interest rate 15%
Interest rate 16%
Interest rate 17%
Interest rate 20%
Current annual Income
40,000
40,000
40,000
40,000
40,000
Total income after expansion (40,000+ 16,000)
56,000
56,000
56,000
56,000
56,000
Less: Existing Interest expenses
10,000
10,000
10,000
10,000
10,000
Less: Addition Interest expenses
10,000
15,000
16,000
17,000
20,000
Net Income after all expenses ( Total income- existing and additional Interest expenses)
36,000
31,000
30,000
29,000
26,000
Return on equity
(Net income after all expenses/ Total equity)
14.4%
12.4%
12%
11.6%
10.4%
Decision to accept or reject
Accept
Accept
Accept
Reject
Reject
Particulars | Interest rate 10% | Interest rate 15% | Interest rate 16% | Interest rate 17% | Interest rate 20% |
Current annual Income | 40,000 | 40,000 | 40,000 | 40,000 | 40,000 |
Total income after expansion (40,000+ 16,000) | 56,000 | 56,000 | 56,000 | 56,000 | 56,000 |
Less: Existing Interest expenses | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 |
Less: Addition Interest expenses | 10,000 | 15,000 | 16,000 | 17,000 | 20,000 |
Net Income after all expenses ( Total income- existing and additional Interest expenses) | 36,000 | 31,000 | 30,000 | 29,000 | 26,000 |
Return on equity (Net income after all expenses/ Total equity) |
14.4% | 12.4% | 12% | 11.6% | 10.4% |
Decision to accept or reject | Accept | Accept | Accept | Reject | Reject |
Return on Equity is the amount of net income earned after all expenses as a percentage of shareholders equity. It shows that how much of the income Company has generated on its own funds. Higher the returns, higher will be the profits for the organization.
To determine:
In the given question, Uber is considering to expand the business and want to raise the funds through notes payable. We have to tell whether to accept or reject the decision by taking the Return on equity as criteria at different interest rates.
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Chapter 14 Solutions
Loose Leaf for Fundamental Accounting Principles
Ch. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQ
Ch. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 15DQCh. 14 - Prob. 16DQCh. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - Prob. 20DQCh. 14 - Prob. 1QSCh. 14 - Prob. 2QSCh. 14 - Prob. 3QSCh. 14 - Prob. 4QSCh. 14 - Prob. 5QSCh. 14 - Prob. 6QSCh. 14 - Prob. 7QSCh. 14 - Prob. 8QSCh. 14 - Prob. 9QSCh. 14 - Prob. 10QSCh. 14 - Prob. 11QSCh. 14 - Prob. 12QSCh. 14 - Prob. 13QSCh. 14 - Prob. 14QSCh. 14 - Prob. 15QSCh. 14 - Prob. 16QSCh. 14 - Prob. 17QSCh. 14 - Prob. 18QSCh. 14 - Prob. 19QSCh. 14 - Prob. 20QSCh. 14 - Prob. 1ECh. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Prob. 4ECh. 14 - Prob. 5ECh. 14 - Prob. 6ECh. 14 - Prob. 7ECh. 14 - Prob. 8ECh. 14 - Prob. 9ECh. 14 - Prob. 10ECh. 14 - Prob. 11ECh. 14 - Prob. 12ECh. 14 - Prob. 13ECh. 14 - Prob. 14ECh. 14 - Prob. 15ECh. 14 - Prob. 16ECh. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Prob. 19ECh. 14 - Prob. 20ECh. 14 - Prob. 1APSACh. 14 - Prob. 2APSACh. 14 - Prob. 3APSACh. 14 - Prob. 4APSACh. 14 - Prob. 5APSACh. 14 - Prob. 6APSACh. 14 - Prob. 7APSACh. 14 - Prob. 8APSACh. 14 - Prob. 9APSACh. 14 - Prob. 10APSACh. 14 - Prob. 11APSACh. 14 - Prob. 1BPSBCh. 14 - Prob. 2BPSBCh. 14 - Prob. 3BPSBCh. 14 - Prob. 4BPSBCh. 14 - Prob. 5BPSBCh. 14 - Prob. 6BPSBCh. 14 - Prob. 7BPSBCh. 14 - Prob. 8BPSBCh. 14 - Prob. 9BPSBCh. 14 - Prob. 10BPSBCh. 14 - Problem 14-11EC Capital lease accounting C3 Braun...Ch. 14 - Prob. 14SPCh. 14 - Prob. 1BTNCh. 14 - Prob. 2BTNCh. 14 - Prob. 3BTNCh. 14 - Prob. 4BTNCh. 14 - Prob. 5BTNCh. 14 - Prob. 6BTNCh. 14 - Prob. 7BTNCh. 14 - Prob. 8BTNCh. 14 - Prob. 9BTN
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