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4 years ago

6

You decide to open a bookstore with a wide selection, comfortable seating, and an internal coffee shop because it has worked ver

y well for other bookstores you have visited. Your strategy could be described as externally neutral?

1 answer:

amid [387]4 years ago

5 0

Yes because you aren’t doing anything special with your bookstore since it is the same as others

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You've collected the following information about Molino, Inc.: Sales $ 215,000 Net income $ 17,300 Dividends $ 9,400 Total debt

evablogger [386]

Answer:

(a) 15.46%

(b) $11,904.11

(c) 6.15%

Explanation:

(a) Sustainable growth rate:

$Return\ on\ equity\ (ROE)=\frac{Net\ income}{Total\ equity}$

$Return\ on\ equity\ (ROE)=\frac{17,300}{ 59,000}$

= 29.32%

Retention Ratio = 1 - Dividend Payout

$=1-[\frac{9,400}{17,300}]$

= 45.66%

$Sustainable\ growth\ rate=\frac{(ROE\times Retention\ Ratio)}{(1-ROE\times Retention\ Ratio)}$

$Sustainable\ growth\ rate=\frac{(0.2932\times 0.4566)}{(1-0.2932\times 0.4566)}$

$=\frac{0.1338}{0.8662}$

= 0.15446

= 15.46%

(b) Additional borrowing:

New Total Asset = (Total debt + Total equity) × (1 + Sustainable growth rate)

= (77,000+59,000) × (1 + 15.46%)

= 157025.4

$New\ Debt=\frac{D}{D+E}\times New\ Total\ Asset$

$New\ Debt=\frac{77,000}{77,000+59,000}\times 157024.4$

= $88904.11

Increase in Borrowing = New debt - old debt

= $88,904.11 - $77,000

= $11,904.11

(c) Internal growth rate:

$ROA=\frac{Net\ income}{Debt+equity}$

$ROA=\frac{17,300}{77,000+59,000}\times 100$

= 12.72%

$Internal\ growth\ rate=\frac{(ROA\times Retention\ Ratio)}{(1-ROA\times Retention\ Ratio)}$

$Internal\ growth\ rate=\frac{(0.1272\times 0.4566)}{(1-0.1272\times 0.4566)}$

$=\frac{0.0580}{0.942}$

= 0.0615

= 6.15%

6 0

3 years ago

Rank the following assets from the lowest level to the highest level of (i) transaction costs, (ii) risk, (iii) liquidity. Ties

ahrayia [7]

Answer:

1) The transaction cost of both he bank deposit and mutual fund are almost equal as transaction in both can be made by visiting a branch or using internet banking or brokering.

2) The risk for the bank deposits are lower thank mutual funds because even thought the mutual fund is highly diversified, its value can still decline because of changes in market or some market crash like the 2008 recession, where as the money in the bank remains intact

3) The liquidity is higher for bank deposits because money can be withdrawn instantly, whenever the depositor wants, where as the liquidity for mutual funds is a bit lower as it takes a couple of business days to make transactions.

Explanation:

5 0

3 years ago

Read 2 more answers

Credenza Industries is expected to pay a dividend of $ 1.25 at the end of the coming year. It is expected to sell for $ 70 at th

Setler [38]

Answer:

$4.64

Explanation:

The total gains for a stock can be broadly classified as both capital gains and dividend gains The capital gain depends on the price of market of the stock prevailing at the time the stock is purchased and the time of the stock sales. For a given firm, dividend gain depends on the dividend policy

From the question given, let us analyze the following,

the expected capital gain value calculated from the sale of the given stock is The current stock value is given by:

(price of the stock after a year + the expected dividend) / capital equity cost

($70 + $1.25) / (1+9%)

= $71.25/1.09 = 65.36

Then,

The capital gain expected from the sale of the stock is given by:

Expected selling price after a year -the stock current value

$70 - $65.36

= $4.64

6 0

4 years ago

As part of understanding your client's needs, you should find out what their sales tax requirements are for their business and l

Rasek [7]

What are possible answers? I’d love to help!!

8 0

3 years ago

According to Graham and Harvey's 2001 survey (Figure 8.2 in the text), the most popular decision rules for capital budgeting use

Elza [17]

Answer:

A) IRR, NPV, Payback period

Explanation:

According to Graham and Harvey's 2001 survey, for capital budgeting decision making, the following capital techniques are used which are described below:

Internal rate of return: It is that rate of return in which the net present value is zero that means initial investment and the present value of the annual cash inflows are equal

Net present value: In this method, the initial investment is subtracted from the discounted present value cash inflows. If the amount comes in positive than the project is beneficial for the company otherwise not.

The computation of the Net present value is shown below

= Present value of all yearly cash inflows after applying discount factor - initial investment

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

Payback period: It refers to the period in which the initial investment amount should be recovered. It is denoted in years

The formula to compute the payback period is shown below:

= Initial investment ÷ Net cash flow

8 0

3 years ago