Answer:
year net cash flow
0 -$150,000
1 $80,000
2 $65,000
3 $50,000
4 $40,000
A) NPV = -$150,000 + ($80,000 x .87) + ($65,000 x .756) + ($50,000 x .658) + ($40,000 x .572) = -$150,000 + $69,600 + $49,140 + $32,900 + $22,880 = -$150,000 + $174,520 = $24,520
B) Yes , because the net present value indicates that the return on the proposal is greater than the minimum desired rate of return of 15%. Since the NPV is positive ($24,520), it means that the cash inflows are higher than the cash outflows when we use a 15% discount rate.
Answer:
$800
Explanation:
$800 = $400 cash + ($1.0 x 40 shares) common share + ($9 x 40 shares) adjusted price in common shares
Answer:
b. issuing new equity
Explanation:
debt to equity ratio = Total debt/ Total equity x 100
and
interest earned ratio = Operating Income ÷ Interest charge
<u>Ways to decrease debt to equity ratio :</u>
1. Increase equity (no effect on interest earned ratio)
2. Decrease debt (increases interest earned ratio)
thus,
issuing new equity have no immediate effect on the times interest earned ratio but will cause debt to equity ratio to decrease.