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Firlakuza [10]
3 years ago
13

Whitman Antique Cars Inc. has the following data, and it follows the residual dividend model. Some Whitman family members would

like more dividends, and they also think that the firm's capital budget includes too many projects whose NPVs are close to zero. If Whitman reduced its capital budget to the indicated level, by how much could dividends be increased, holding other things constant?Original capital budget $3,000,000New capital budget $2,150,000Net income $3,500,000% Debt 35%a. $484,100b. $493,500c. $404,200 d. $521,700 e. $470,000
Business
1 answer:
djverab [1.8K]3 years ago
6 0

Answer:

Dividends would increase by $552500.

Explanation:

Original capital budget         $3,000,000

New capital budget              $2,150,000

Net income                            $3,500,000

% Debt                                          35%

                                                         Old                    New

% Debt                                                   35%                 35%

% Equity = 1 – %Debt                            65%                 65%

Capital budget                              $3,000,000            $2,150,000

Net income (NI)                         $3,500,000              $3,500,000

Equity needed to support

the capital budget =

%Equity * Capital budget               $1,950,000               $1,397,500

Dividends paid =                            $1,550,000               $2,102,500

NI - Equity needed

if positive.

Increase in dividends paid = $2,102,500 - $1,550,000 = $552500.

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fredd [130]

EcoMart establishes General Journal

May 2

Dr Petty cash 1050

Cr Cash 1050

May 30

Dr Merchandise inventory 120

Dr Postage expense 359

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Dr Cash short and over 9

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June 1

Dr Petty cash 150

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Workings:

May 30,Merchandise inventory 120+ Postage expense 359+ Miscellaneous expenses 240+ Cash short and over 9 = $728

June 1

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7 0
3 years ago
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance
kari74 [83]

Answer:

Explanation:

NB: please check the attached files for workings.

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8 0
3 years ago
Sarahh Roberts is the assistant chief accountant at the HK Company, a manufacturer of computer chips and cell phones. The compan
vodomira [7]

Answer:

Explanation:

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2. The share holders, the management, the employees etc. are the stakeholders

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b) She could get the management informed about the divergence and make a request for few more days to identify and correct the error, so that a dependable and accurate financial statement can be issued.

c) Another alternative is for her to get the report issued  only to the management for their consideration while  the error is unaltered, and inform them that only few days will be  required for the error to be identified  and amended .

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7 0
3 years ago
Tuna Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by
STatiana [176]

Answer:

$985,000

Explanation:

Given that,

Pretax book income = $1,000,000

Increase in net reserve for warranties = $25,000

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Book equivalent of taxable income:

= Pretax book income - Dividend received deduction

= $1,000,000 - $15,000

= $985,000

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7 0
3 years ago
The leaders of a religious group decided to start a life insurance organization to insure members of the religious group. The in
Vladimir [108]

Answer:

C) fraternal insurer.

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This insurance works in a similar fashion to normal insurance policies where the insured must pay monthly fees which are called contributions in this case.

Fraternal insurance policies must be provided by fraternal benefit societies which can be religious, ethnic or vocational. Generally most fraternal insurance provide life insurance policies only, and in order to be a client you must belong to their church or group.

7 0
3 years ago
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