a.
To determine: The liquidity position of C Corporation, comparison of liquidity position with peers and the changes in liquidity position over the time.
Ratio Analysis: Ratio is used to compare two arithmetical figures. In case of the ratio analysis of the company, the financial ratios are calculated. The financial ratios examines the performance of the company and are used in comparing with other same business. It indicates relationship of two or more parts of financial statements.
Liquidity Position: The liquidity position of the company is indicated by liquidity ratios, which gives the idea of whether the company has the ability to pay back its liabilities, which has less than one year maturity.
b.
To determine: The Assets management position of C Corporation, comparison of assets management position with peers and the changes in assets management position over the time.
Assets Management Position: The assets management position of the company is indicated by assets management ratios which give idea how well the company is using its assets.
c.
To determine: The debt management position of C Corporation, comparison of debt management position with peers and the changes in debt management position over the time.
Debt Management Position: Debt management position is indicated by the debt management ratios which give an idea how the company finances its assets as well as the capability to pay back its long-term debt.
d.
To determine: The profitability ratio of C Corporation, compare it with peers and the change in the profitability of the company over the time.
Profitability Ratios: These ratios give an idea whether the company is able to operate profitably and is efficient in using its assets.
e.
To determine: The market value ratios, comparison of ratios with peers and changes in market values over the time.
Market Value Ratios: The market value ratios give idea about the view of investors towards the company and company’s future scenario.
f.
To calculate: The ROE of the C company as well industry average ROE using DuPont equation and way of comparing of Company’s financial position with industry’s average numbers.
Du Pont Equation: Among all ratios, return on equity is very common. It shows the value of the firm. Improvement in the ROE is considered as valued addition to the firm. ROE can be linked with other ratios. Analysis of such ratios will indicate proper reason for change in ROE. The combination is known as Du Pont equation which is shown below:
g.
To identify: The changes in the ratios, if the company has started cost-cutting measures, which allowed it to hold lower level of inventory and substantially deceased the cost of goods sold.
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Chapter 4 Solutions
FUND.OF FINANCIAL MGMT:CONCISE-MINDTAP
- Delta Corporation has the following capital structure: Cost Weighted (after-tax) Weights Cost Debt 8.1% 35% 2.84% Preferred stock (Kp) 9.6 5 .48 Common equity (Ke) (retained earnings) 10.1 60 6.06 Weighted average cost of capital (Ka) 9.38% a. If the firm has $18 million in retained earnings, at what size capital structure will the firm run out of retained earnings? b. The 8.1 percent cost of…arrow_forwardDillon Enterprises has the following capDillon Enterprises has the following capital structure. Debt ........................ 40% Common equity ....... 60 The after-tax cost of debt is 6 percent, and the cost of common equity (in the form of retained earnings) is 13 percent. What is the firm’s weighted average cost of capital? a. An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the after-tax cost of debt is 7 percent, and the cost of common equity (in the form of retained earnings) is 15 percent. Recalculate the firm’s weighted average cost of capital. b. Which plan is optimal in terms of minimizing the weighted average cost of capital?arrow_forwardCompute Ke and Kn under the following circumstances: a. D1= $5, P0=$70, g=8%, F=$7 b. D1=$0.22, P0=$28, g=7%, F=2.50 c. E1 (earnings at the end of period one) = $7, payout ratio equals 40 percent, P0= $30, g=6%, F=$2,20. Note: D1 is the earnings times the payout rate. d. D0 (dividend at the beginning of the first period) = $6, growth rate for dividends and earnings (g)=7%, P0=$60, F=$3. You will need to calculate D1 (the dividend after the first period).arrow_forward
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- Please don't answer i will give unhelpful all expert giving wrong answer he is giving answer with incorrect data.arrow_forward4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…arrow_forwardHello tutor give correct answerarrow_forward
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