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Dmitriy789 [7]
3 years ago
13

Laserscope Inc. is trying to determine the best combination of short-term and long-term debt to employ in financing its assets.

Laserscope will have $16 million in current assets and $20 million in fixed assets next year and expects operating income (EBIT) to be $4,1 million. The company's tax rate is 40% and its debt ratio is 50%. The firm's debt will be financed by an conservative policy using $6 million of short-term debt. The short-term interest rate is 7.0% and the long-term interest rate is 10.3%. What is the return on shareholders' equity (ROE) under this policy
Business
1 answer:
snow_lady [41]3 years ago
7 0

Answer:

Laserscope Inc.

Return on Equity (ROE):

= $1,466,400/$18,000,000 * 100

= 8.15%

Explanation:

a) Laserscope's Return on Equity (ROE) is a financial performance measure, calculated by dividing the net income or Earnings After Tax (EAT) by its total shareholders' equity.  It is usually expressed as a percentage.  So the above calculation is further multiplied by 100.

b) Data and Calculations:

Current assets = $16

Fixed assets = $20

Total assets = $36

Debt ratio = 50%  of $36 million = $18 million

Therefore, Stockholders' equity = 50% (1 - 50%) or $18 million

EBIT = $4.1 million

Short-term debt = $6 million

Long-term debt = $12 million

Interest on short-term debt = $420,000 (7% * $6 million)

Interest on long-term debt = $1,236,000 (10.3% * $12 million)

Total interest expense = $1,656,000

Earnings before interest and taxes = $4,100,000

Interest expense                                   1,656,000

Earnings before taxes                          2,444,000

Company tax (40%)                                (977,600)

Earnings after taxes (EAT)                 $1,466,400

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Te recomiendo el siguiente libro que te puede ayudar.

"La Sabiduría de las Finanzas. Descubre el lado humano en el mundo del riesgo y del rendimiento." El autor es Mihir A. Desai.  Hay otro que te puede servir que se llama "El Pequeño Libro de los Altos Rendimientos con Bajo Riesgo. El autor es "Pim Van Vliet. Ambos hablan del los riesgos de las inversiones y los rendimientos en un mundo volátil.

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3 0
3 years ago
The following transactions occurred during March 2016 for the Wainwright Corporation. The company owns and operates a wholesale
Triss [41]

Answer:

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2.Investing Activity : $10,000 and Non-cash Financing and Investing Activity : $30,000

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5.Operating Activity :  -$5,000

6.Operating Activity :  -$6,000

7.Operating Activity :  -$70,000

8.Operating Activity :   $55,000

9.Operating Activity :   $1,000

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Investing Activities involves the entity`s sale or purchase of Investments.

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6 0
3 years ago
Data were collected in twenty major urban areas on the percent of women in the labor force. Data were collected in 1968 and agai
garri49 [273]

Answer: Matched pairs design

Explanation:

A matched pairs design is a type of study used when 2 treaments are present in an experiment. The individuals in the design can be divided into pairs using a blocking variable, and each pair can then be allocated to treatments at random. This is thus a special type of randomized block design.

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6 0
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madam [21]

Answer: Option (b) is correct.

Explanation:

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Salaries paid = $14,000

Owners invested = $23,000

Borrowed on a five-year note = $23,000

Interest paid = $3,000

Paid for a two-year insurance policy = $6,800

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Gross Margin = Revenues - Cost of Goods Sold

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Profit before tax = Gross Margin - Salaries - Insurance payment - Interest

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6 0
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olga55 [171]

Answer:

intrinsic rewards

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8 0
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