Financial managers use data prepared by accountants to develop strategies for improving the financial performance of the firm.

Alternative Financing Plans Frey Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 10% bonds (at

Alja [10]

Answer:

1st Plan Earning per Share $ 1.80

2nd Plan Earning per Share $ 2.30

The Second Plan provides better earnings per share.

Explanation:

1st Plan:

Income before Interest and taxes 1,008,000

Bonds Payable Interest: (144,000)

Income before taxes 864,000

Income tax expense (345,600)

Net Income 518,400

Quantity of Common Stock:

$ 1,440,000 / $5 = 288,000

Earing per share:

518,400 / 288,000 = $1.80

2nd Plan:

Income before Interest and taxes 1,008,000

Bonds Payable Interest: (72,000)

Income before taxes 936,000

Income tax expense (374,400)

Net Income 561,600

Preferred Shares Dividends (120,000)

Available for common stock 441,600

Quantity of preferred Stock:

$1,200,000 / $10 =120,000 shares

Dividends on Preferred Shares:

120,000 x $1 = 120,000

Quantity of Common Stock:

$ 960,000 / $5 = 192,000

Earing per share:

441,600 / 192,000 = $2.30

3 0

2 years ago

Tri-coat Paints has a current market value of $50 per share with earnings of $5.97. What is the present value of its growth oppo

Gnesinka [82]

Answer: $0.25

Explanation:

Fron the question, we are informed that Tri-coat Paints has a current market value of $50 per share with earnings of $5.97. We are further told that the required return is 12%.

The present value of its growth opportunities (PVGO) will be:

= $50 - ($5.97/12%)

= $50 - ($5.97/0.12)

= $50 - $49.75

= $0.25

Therefore, the present value of its growth opportunities (PVGO) if the required return is 12% is $0.25.

6 0

2 years ago

For the past two years, Swen Johannsen, owner/general manager of Swen's Fine Duds, a local men's clothing store, has fought to s

Viefleur [7K]

Answer:

Swen is using product/service repositioning strategy.

Explanation:

Product Repositioning simply refers to the art of altering the target markets perception of one's product and or services.

Swen is still in the clothing business. He has only changed the way he delivers it to the target consumers.

Of course, this sometimes calls for a change in product mix (which refers to altering the type of products being offered). However, the central idea of the strategy still holds as customers now see the business differently.

This type of strategy is easier to pull off for start-ups, or unpopular businesses trying to make a comeback. Where the business is a well-established brand, it can prove extremely difficult and may be costly.

Cheers.

4 0

2 years ago

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2018, 150 share

amid [387]

Answer and Explanation:

The journal entries are shown below:

On Mar 1

Cash (2,200 × $17) $37,400

To Common Stock (2,200 × $1) $2,200

To Paid in capital in excess of par - Common stock (2,200 × $16) $35,200

(Being the issuance of the common stock is recorded)

On April 1

Cash (150 × $32) $4,800

To Preferred stock (150 × $10) $1,500

To Paid in capital in excess of par - Preferred stock (150 × $22) $3,300

(Being the issuance of the preferred stock is recorded)

O Jun 1

Dividends $2,820

Dividends payable $2,820

(Being the dividends declared is recorded)

On June 30

Dividends payable $2,820

To Cash $2,820

(Being the dividends paid is recorded)

On Aug 1

Treasury stock (250 × $14) $3,500

To Cash $3,500

(Being the treasury stock is recorded)

On Oct 1

Cash (150 × $16) $2,400

To Treasury stock (150 × $14) $2,100

To Paid in capital in excess of par -Treasury stock (150 × $2) $300

(Being the reissue of treasury stock is recorded)

The computation of the dividend is shown below:

For common stock

= (2,200 + 2,200) × $0.60

= 4,400 × $0.60

= $2,640

For preferred stock

= (150 + 150) × $0.60

= $180

Total dividends is

= $2,640 +$180

= $2,820

4 0

3 years ago

The price of digital cameras fell because of improvements in production technology. As a result, the demand for non-digital came

zavuch27 [327]

Answer:

The answer is: B) The statement is false. A decrease in the price of digital cameras would decrease the demand for non-digital cameras, but a decrease in the price of non-digital cameras would not cause the demand for non-digital cameras to decrease.

Explanation:

Suppose we are not currently living in 2019, instead we are back 12 years to 2007 (before the iPhone). Back then , digital cameras were still used by common "unprofessional" users. Digital cameras were an improvement compared to non-digital cameras, so the price of non-digital cameras were much lower than their digital counterparts.

If the price of digital cameras decreased, then the price of non-digital cameras would decrease also. For example, if luxury car companies like Mercedes Benz started selling sedan cars for $20,000, Ford and Chevrolet would be forced to lower the price of their cars since they wouldn't be able to compete with MB at the same price.

But a decrease in the price of non-digital cameras would never decrease their demand. Something else would have caused that decrease. Probably digital cameras became so cheap that everyone could afford one and since they were so much better than non-digital cameras, people simply stopped buying non-digital cameras.

8 0

2 years ago