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
Nataly [62]
3 years ago
5

has projected EBIT to be $225,000 for next year. Their tax rate is 21% and there is $`500,000 in equity. Precise Electronics Inc

has no debt currently, but the board is considering a loan of $150,000 at 8% interest, which they will use to repurchase shares of their own stock at $50 per share. If there is a recession, EBIT could be only 75% of projected. If there is an expansion, EBIT might be 40% greater than projected. What will their return on equity be under the current structure and under the proposed structure for each scenario
Business
1 answer:
vodomira [7]3 years ago
7 0

Answer:

current EBIT = $225,000, net income = $225,000 x 0.79 = $177,750

EBIT under expansion = $225,000 x 1.4 = $315,000, net income = $315,000 x 0.79 = $248,850

EBIT under recession = $225,000 x 0.75 = $168,750, net income = $168,750 x 0.79 = $133,312.50

current equity = $500,000

equity under proposed structure = $500,000 - $150,000 = $350,000

interest expense per year under proposed structure = $150,000 x 8% = $12,000

net income current economy = ($225,000 - $12,000) x 0.79 = $168,270

net income economic expansion = ($315,000 - $12,000) x 0.79 = $239,370

net income economic recession = ($168,750 - $12,000) x 0.79 = $123,832.50

return on equity = net income / total equity

ROE under current structure:

  • no change in the economy = $177,750 / $500,000 = 35.55%
  • economic expansion = $248,850 / $500,000 = 49.77%
  • economic recession = $133,312.50 / $500,000 = 26.67%

ROE under proposed structure:

  • no change in the economy = $168,270 / $350,000 = 48.08%
  • economic expansion = $239,370 / $350,000 = 68.39%
  • economic recession = $123,832.50 / $350,000 = 35.38%
You might be interested in
As a revenue cycle auditor, explain how you will monitor compliance, denials, resubmitted claims, appeals for denied claims, and
goldfiish [28.3K]

Answer:

Ashley should review medical records for documentation compliance for CPT, Level II HCPCS, and diagnosis codes determining that regulations are being complied with as evidenced in medical record documentation; and evaluating appropriateness of billing and coding procedures.

Explanation:

7 0
2 years ago
A 6-year bond, 8% semiannual coupon bond sells at par ($1,000). Another bond of equal risk, maturity, and par value pays an 8% a
timofeeve [1]

Answer:

Explanation:

  • The bond has 8% coupon paid semiannually, and those bonds sell at their par value.
  • Since the bond sales at par value, Market rate (Yield) = Coupon rate =8%

<u>Second bond:</u>

  • Coupon rate = 8%
  • Par value = $1,000
  • Semiannual coupon amount = 1000 x 8%/2 = $40
  • Time to maturity = 6 years = 12 semiannual periods
  • Semiannual Yield = 8%/2 = 4%

To get price of this bond we will use PV function of excel:

= PV (rate, nper, pmt, fv, type)

= PV (4%, 12, -40, -1000, 0)

= $1053.32

  • Price of this bond = $1,053.3
7 0
2 years ago
Read 2 more answers
ExxonMobil uses a(n) _____ appeal when it explains technical aspects of its products, such as lithium ion batteries, hydrogen te
solniwko [45]

Answer:

D. Informational

Explanation:

Informational appeal is a form of advertisement in which a producer or marketer explain his/her products to viewers and target customers. It gives a brief highlight to the benefit a consumer will get from using the specifit product. It elucidates and shines more lights on a products attributes, benefits and characteristics. When ExxonMobil explains areas on lithium ion batteries, hydrogen technology, biofuels, and CO2 capture technologies, they are using information appeal.

7 0
3 years ago
Rice Corp. noticed that a check written by the company for utility expense in the amount of $1,000 was incorrectly recorded by t
Xelga [282]

No entry is required on the company's books.

<h3>What is a journal entry?</h3>

The date, the amount to be credited and debited, a brief description of the transaction, and the accounts involved are all included in each journal entry along with other information pertinent to a single business transaction. Depending on the business, it could include a list of the impacted subsidiaries, tax information, and other details.

Journal entries are of six main types, that is:

  • Opening Entries
  • Transfer Entries
  • Closing Entries
  • Adjusting Entries
  • Compound Entries
  • Reversing Entries

To know more about Adjusting Entries refer to: brainly.com/question/13449237

#SPJ4

7 0
2 years ago
What characteristics of an organizational structure and culture are best suited to achieving a cost-leadership strategy
S_A_V [24]

An informal type of organizational structure is one best suited for achieving a cost-leadership strategy especially when the managers is promoting innovation.

<h3>What is a cost leadership strategy?</h3>

This is a cost strategy that relies on a firm's ability in using a lower costs of production to offer quality products at low prices.

These type of strategy is best achieved with an informal type of organizational structure & culture.

Read more about cost leadership strategy

<em>brainly.com/question/26891629</em>

4 0
2 years ago
Other questions:
  • Suppose Stark Ltd. just issued a dividend of $2.24 per share on its common stock. The company paid dividends of $1.80, $1.98, $2
    15·1 answer
  • On July 1, 2019, Cullumber Company pays $12,000 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fis
    9·1 answer
  • 8. Brady Inc. reported FIFO ending inventory of $114,000 and FIFO beginning inventory of $110,000 for 2018. Inventory purchases
    15·1 answer
  • Suppose the Fed decides to increase the money supply. It purchases a government bond worth $2,000 from Antonia, a private citize
    6·1 answer
  • Young Corp. purchased equipment by making a down payment of $4,000 and issuing a note payable for $18,000. A payment of $6,000 i
    7·1 answer
  • Warren opened a new computer store in town. When customers purchase a computer from his store, they automatically receive an ext
    14·1 answer
  • Q 11.41: Jackson Essentials wants to pay a cash dividend to its stockholders. It has a balance of $3,847,318 in its Retained Ear
    7·1 answer
  • Pensacola Inc. exchanged old equipment for new equipment in two exchange transactions. Each transaction has commercial substance
    14·1 answer
  • Give me atleast 2 question about mice industry
    13·2 answers
  • If only one airline serves a town, does a monopoly exist? What about competition from other services?
    8·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!