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Svetllana [295]
2 years ago
10

Firm AB and Firm YZ are identical except for their debt-to-total-assets ratios (D/TAs) and interest rates on debt. Each has $200

,000 in assets, $40,000 EBIT, and a 40 percent marginal tax rate. Firm AB has a D/TA ratio of 40 percent and pays 7.5 percent interest on its debt, whereas YZ has a 60 percent interest on its debt and pays 10 percent interest on debt. Each firm has 5,000 shares of common stock outstanding. Calculate each firm's EPS and ROE (ROE = Net income/Equity). Discuss your results.
Business
1 answer:
Vilka [71]2 years ago
3 0

Answer:

the correct answer is

NOT AB EPS = $3.08

AB ROE = 17%

YZ EPS = $2.36

YZ ROE = 18%

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Effective reading involves what four steps? Select one: a. Preparing, reading, capturing key ideas, and reviewing. b. Preparing,
lidiya [134]

Answer:

Preparing, reading, capturing key ideas, and reviewing.

Explanation:

8 0
3 years ago
On June 30, 2018, the High Five Surfboard Company had outstanding accounts receivable of $600,000. On July 1, 2018, the company
attashe74 [19]

Answer:

The Journal entry is as follows:

On July 1,

Cash A/c                                  Dr. $439,200

Finance charge Expense A/c Dr. $10,800

To Financing arrangement A/c                       $450,000

(To record the amount of borrowings)

Workings:

Finance charge expense = ($600,000 × 1.8%)

                                          = $10,800

So, cash account = $450,000 - $10,800

                             = $439,200

4 0
2 years ago
Suppose that the reserve ratio is 10% when the Fed sells $25,000 of U.S. Treasury bills to the banking system. If the banking sy
andre [41]

Answer:

d $250,000; subtracted from

Explanation:

Sales of U.S. Treasury bills to the banking system by the Fed is a contractionary monetary policy that will reduce the money supply.

Based on the money supply multiplier, the amount of the reduction in money can be calculated as follows:

Amount of reduction in money supply = $25,000 / 10% = $250,000.

Therefore, if the banking system does NOT want to hold any excess reserves, <u>250,000</u> will be <u>substracted from</u> the money supply.

7 0
3 years ago
The yield to maturity on 1-year zero-coupon bonds is currently 6.5%; the YTM on 2-year zeros is 7.5%. The Treasury plans to issu
alex41 [277]

Answer:

1. PV = 101.87

2. YTM = 7.46%

3. Price of the bond  is $100.92

Explanation:

PV = 8.5/ (1.065) + 108.5/ (1.075)2

PV = 7.981 + 93.889

PV = 101.87

Part B:

PV = 101.870

FV = 100

N = 2

PMT = 8.5

Using Financial Calculator:

r = 7.459237

YTM = 7.46%

Part C:

The forward rate for next year, derived from the zero-coupon yield curve, is approximately:

(1 + forward Rate) = (1 + 0.075)2/ (1.065)

forward rate = 8.51%

Price of the bond = 108.5/ (1.0851)

Price of the bond = 100

Part D:

Interest Rate = 8.51% - 1% = 7.51%

Price of the bond = 108.5/ (1.0751)

Price of the bond = 100.92

5 0
3 years ago
Esmerelda simplified a complex fraction. Her work is shown below.  What errors did Esmerelda make? Select three options. Esmere
Schach [20]

Picture relating to the question is attached below :

Answer:

Esmerelda did not use the recipro al of the Divisor.

Esmerelda added the numerator

Esmerelda added the denominator

Explanation:

Esmerelda's work:

-5 1/4 ÷ 3/2= -21/4 ÷3/2 = (-21/4)(3/2) = -24/6 = - 4

Esmerelda's errors:

When changing the quotient sign to multiplication ; the reciprocal of the denominator should be used to divide the numerator :

Hence,

-21/4 ÷3/2 = (-21/4)(3/2) (wrong expression)

-21/4 ÷3/2 = (-21/4)(2/3) (correct expression)

Also,

(-21/4)(3/2) = -24/6 ( wrong simplification)

The bracket symbol indicates multiplication. Hence, the values should be multiplied. The two Numerator values and the two denominator values.

5 0
2 years ago
Read 2 more answers
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