Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 2, Problem 6P
To determine

The company’s year-end debt ratio.

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ECONOMICS At the end of 2011 Home Depot's total capitalization amounted to $29,031 million. In 2012 debt investors received interest income of $648 million. Net income to shareholders was $4,487 million. (Assume a tax rate of 35%.) Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Give your answer in millions rounded to 2 decimal places.)
You are a shareholder in a corporation which has elected subchapter S tax treatment. The corporation announces a revenue of $6 per share, of which it retains $1 for reinvestment and distributes the rest as dividend payments. Given that the personal tax rate is 34.72%, how much tax must you pay per share? (round your answers to two decimal places)
Ross Corporation is a debtor in a reorganization proceeding under Chapter 11 of the Bankruptcy Code. By fair and proper valuation, its assets are worth $100,000. The indebtedness of the corporation is $105,000, and it has outstanding $100 par value preferred stock in the amount of $20,000 and $30 par value common stock in the amount of $75,000. The plan of reorganization submitted by the trustees would give nothing to the common shareholders and would issue new bonds in the face amount of $5,000 to the creditors and new common stock in the ratio of 84 percent to the creditors and 16 percent to the preferred shareholders. Should this plan be confirmed? Explain.
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