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Temka [501]
3 years ago
13

In 2013, Natural Selection, a nationwide computer dating service, had $500 million of assets and $200 million of liabilities. Ea

rnings before interest and taxes were $120 million, interest expense was $28 million, the tax rate was 40%, principal repayment requirements were $24 million, and annual dividends were 30 cents per share on 20 million shares outstanding.
a) Calculate the following for Natural Selection:
1) Liabilities-to-equity ratio
2) Times-interest-earned ratio
3) Times burden covered
b) What percentage decline in earnings before interest and taxes could Natural Selection have sustained before failing to cover:
1) Interest payment requirements?
2) Principal and interest requirements?
3) Principal, interest, and common dividend payments?
Business
1 answer:
Allisa [31]3 years ago
3 0

Answer and Explanation:

The computation is shown below:

a)  Liabilities to equity ratio is

= $200 ÷ ($500 - $200)

= 0.667

Times interest earned ratio is

= EBIT ÷ Interest expense

= $120 ÷ $28

= 4.285

Times burden covered is

= EBIT ÷  (Interest +Principal repayment ÷ ( 1 -tax rate))

= 120 ÷ (28+24 ÷ (1-0.4))

= 1.764

b)

Interest paying requirements  

= ($128 - $20) ÷ 120

= 76.7%

Principal and interest requirements  

= [$120 - ($28 + $24 ÷ (1-0.4))] ÷ 120

= 0.433 or 43.3%

Principal, Interest and Common dividend payments -

= [$120 - ($28 + (($24 + 0.3 × 20) ÷ (1 - 0.4))] ÷ 120

= 0.35 or 35%

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Easy Car Corp. is a grocery store located in the Southwest. It expects to pay an annual dividend of $6.30 next year to its share
emmainna [20.7K]

Answer:

Missing question <em>"1. What is the cost of debt for Easy Corp? 2. How many interest payments are left for the bond of Easy Corp? 3. What is the interest payment per period for the bond? 4. What is the discount rate per period to use in pricing the bonds? 5. What is the market value of equity for Easy? 6. What is the cost of equity for Easy?"</em>

<em />

1. Cost of debt is equal to YTM, which is equal to 10%

Cost of debt = YTM = 10%

2. Number of interest payment to be made is equal to 26 * 2 = 52

This is because payment is made semi annually

3. Interest payment per period = 8.9141% / 2 * $1,000

Interest payment per period = 4.45705% * $1,000

Interest payment per period = $44.57

4. As the period is semiannual, discount rate per period is equal to 10% / 2 = 5%

5. Market value of equity = 600,000*60 = $36,000,000

6. Cost of equity = Dividend price + Growth rate

Cost of equity = 6.3/60 + 0.05

Cost of equity = 0.105 + 0.05

Cost of equity = 0.155

Cost of equity = 15.5%

7 0
3 years ago
One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is th
alexdok [17]

Answer:

the marginal revenue product of baseball players is greater than the marginal revenue product of college professors.

Explanation:

Baseball players are responsible for a baseball teams' revenues, and they add up billions of dollars per year. For example, Max Scherzer sells jerseys, caps and other merchandise for millions of dollars, and his team winning the World Series this year increases the team's revenue greatly. Sometimes even without winning a championship some players still generate lots of revenue.

An individual's salary should be proportional to the revenue that they generate. Colleges have huge amounts of revenue, and college professors are responsible for a large portion of it.

The problem hear is that there are a lot of college professors and assistants, and the revenue must be split between many people. For example, Harvard University's revenue is about $5.5 billion per year, but it has over 16,000 employees (including about 2,400 professors).

7 0
3 years ago
Gerritt wants to buy a car that costs $30,750. The interest rate on his loan is 5.65 percent compounded monthly and the loan is
svet-max [94.6K]

Answer:

$444.07

Explanation:

EMI = [P * I * (1+I)^N]/[(1+I)^N-1]

P =loan amount or Principal = 30750

I = Interest rate per month = .0565/12

N = the number of installments = 7*12 = 84

EMI = [30750*.0565/12* (1+(.0565/12))^84]/[(.0565/12))^84-1]

EMI = [30,750 * 0.0565  / 12 * 1.48374877204] / [1.48374877204 - 1]

EMI = 214.819001902 / 0.48374877204

EMI = $444.07

7 0
3 years ago
Which of the following is a nonmanufacturing business where process costing would most likely be used? An auto body shop. A furn
solmaris [256]

All of them are the non-manufacturing business where process costing would most likely be used.

Explanation:

  • All are non-manufacturing business which are as follows,
  • An auto body shop.
  • A furniture repair shop.
  • A laboratory that tests water samples for lead A tailoring shop.
  • A beauty shop.
  • Non-manufacturing business costs refers to those business where it is incurred outside the factory or production unit
  • Non-manufacturing costs includes,
  • selling expenses
  • general expenses
  • Selling Expenses
  • It is also called as selling and distribution expenses.
  • Non-manufacturing expenses have no impact on the production cost of the company due to their period costs.
7 0
3 years ago
16. When filing by subject, which of the following would be filed first? *
andriy [413]

Answer:

C. additional information

Explanation:

When you gather data, the most important thing that you need to fill first is the identity of the subjects.

In business, the data that companies take through questionnaires is made in order to read the market's trends or customers' general preference. In order for the data to be usable, the companies need to be able to differentiate subjects based on different characteristics (such as age, gender, income level, etc). All of this information is filled under the additional information box on every files.

4 0
3 years ago
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