1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
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

You might be interested in
Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average in
frez [133]

Answer:

Inventory turnover period = 60.8 days

Explanation:

<em>The inventory turnover period also known as the inventory days is the average length of time it takes  business to sell its stocks and replace same. The shorter the better as it indicates a high patronage from  customers.</em>

It is calculated as follows:

Inventory turnover = (Average inventory / cost of goods ) × 365 days

                              = (2,500,000/15,000,000)× 365 days

                              = 60.83 days

5 0
3 years ago
Read 2 more answers
Sylvester is taking out a loan and is confused by the jargon. Which of the following explanations might help him? a. TERM is the
ryzh [129]

Personal loans, home loans, student loans, auto loans, and other sorts of loans are among the most common.

What is a loan, in plain English?

A loan is a type of debt that a person or other entity incurs. The lender advances the borrower a certain amount of money, typically on behalf of a business, financial institution, or government. The borrower accepts a specific set of terms in return, which may include any financial costs, interest, a repayment schedule, and other requirements.

What are the different forms of loans?

An amount of money that a person or business borrows from a lender is known as a loan. It can be divided into three basic groups: conventional, open-end and closed-end loans, and unsecured and secured loans.

To learn more about loans from the given link.

brainly.com/question/26011426

#SPJ9

5 0
10 months ago
If happiness was money, what would your job be?​
lawyer [7]

Answer:

Being appreciated by people.

7 0
3 years ago
Read 2 more answers
Even though the nation faces political instability, the island of Pantay with its wide, expansive beaches is a destination hub f
galina1969 [7]

Answer: Foreign Direct Investment

Explanation:

Foreign Direct Investment is a type of investment into a country where the foreign investor establishes a presence by actually running and operating a company in the domestic country.

This is what the large theme park wants to do in Pantay. By making a commitment and hiring hundreds of locals, the company is intent on running a company on the island so this is Foreign Direct Investment.

7 0
3 years ago
Last month, Laredo Company sold 650 units for $125 each. During the month, fixed costs were $8,850 and variable costs were $75 p
Y_Kistochka [10]

Answer:

1. $50 and 40%

2. 177 units and $22,125

3. 473 units and 72.77%

Explanation:

Price = $125

Variable cost = $75

Fixed cost =$8,850

Contribution margin is the net of sales price and variable cost of the product. It is the cost available to recover the fixed cost and make profit afterward.

1. Contribution margin = Sales price - Variable cost = $125 - $75 = $50

Contribution margin ratio = Contribution margin / Sale price = $50 / $125 = 40%

Break-even is the level of sales at which business has no profit no loss situation.

2. Break-even point = Fixed cost / Contribution margin per unit = $8,850 / $50 = 177 units

Break-even in $ = 177 units x $125 = $22,125

Margin of safety is the level of sales at which the business is safe from making loss. Margin of safety measures the profit after the break-even point.

3. Margin of Safety = Total sales - Break-even point = 650 units - 177 units = 473 units

Margin of safety to sales = ( Margin of safety / Total sales ) = ( 473 units / 650 units ) x 100 = 72.77%

3 0
3 years ago
Other questions:
  • Which of the following statements regarding convertible term insurance is true?
    8·1 answer
  • Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% i
    5·1 answer
  • What is one of the main effects that the internet has had on buisness
    15·1 answer
  • To join together against and have nothing to do with a person, business, nation, employer, or anything else in order to coerce o
    15·1 answer
  • Ether Inc., an electronics manufacturer, offers free T-shirts with the company's logo on them free of charge to its customers. E
    15·1 answer
  • On a supply and demand graph, the line that indicates price is the.
    14·1 answer
  • Shirley adds $2,000 to her savings on the last day of each year. Shawn adds $2,000 to his savings on the first day of each year.
    7·1 answer
  • Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below
    14·1 answer
  • Brother Company uses variable costing. Their direct materials are $8, direct labor is $6 and total overhead is $5 of which $3 is
    8·1 answer
  • jose owns a dog whose barking annoys jose's neighbor jane. suppose that the benefit of owning the dog is worth $100 to jose and
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!