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Shtirlitz [24]
3 years ago
6

Last year Kruse Corp had $410,000 of assets (which is equal to its total invested capital), $403,000 of sales, $28,250 of net in

come, and a debt-to-total-capital ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets and total invested capital to $252,500. The firm finances using only debt and common equity. Sales, costs, and net income would not be affected, and the firm would maintain the same capital structure (but with less total debt). By how much would the reduction in assets improve the ROE? Do not round your intermediate calculations. Question 2 options: 7.05% 6.69% 6.41% 7.26% 7.82%
Business
1 answer:
DiKsa [7]3 years ago
8 0

Answer:

a. 7.05%

Explanation:

ROE before reduction in assets:

Total assets = $410,000

Debt to total capital ratio = 39%

Equity to total capital ratio = 1 - 39% = 61%

Equity = 410000 * 61% = $250,100

Net Income = $28,250

ROE = Net Income / Equity = 28250 / 250100 = 11.2955%

After reduction in assets:

Total assets = $252,500

Net Income is not affected and is same at = $28,250

Capital structure is same.

New Equity = 252500 * 61% = $154,025

New ROE = 28250 / 154025 = 18.3412%

Improvement in ROE = 18.3412% - 11.2955%

Improvement in ROE = 7.05%

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The theory of transfer of training describes the positive, zero, or adverse performance results of a training program. It is a specific application of the theory of transfer of learning.

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7 0
2 years ago
When creditors, managers, and investors look at expenses as a percentage of revenue, they are __________.
sineoko [7]

Answer:

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Explanation:

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7 0
3 years ago
Goodwill represents the excess of the implied value of an acquired company over the
Paul [167]

Answer: Option A

                                           

Explanation: In simple words, goodwill refers to the additional value that an organisation have from its identifiable assets due to its operations over a period of time.

In other words, it can be defined as an intangible asset which an organisation creates over a period of time while establishing the brand image. These assets are not depreciated but are tested for impairment every year. For example brands like apple, Reebok and McDonald have high goodwill in the market which attracts customers towards them

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6 0
3 years ago
Truman Co. sells a large number of common household items, while Stapleton sells a small number of expensive items. The two comp
slava [35]

Answer:

Truman has a higher inventory turnover ratio and Stapleton has a higher gross profit ratio ( D )

Explanation:

Truman sell a large number of common household items ( assuming 100 unit )

while Stapleton sells a small number of expensive items ( assuming 20 units )

lets assume : Truman sells at $5 per unit and Stapleton sells at $50 per unit

with the above assumptions

Truman gross profit ratio = $5 * 100 units = $500

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from the above assumptions you can deduce that the gross profit made by Stapleton is higher although he sells a smaller amount of goods while Truman has a higher Turnover because of its higher number of sold units

4 0
3 years ago
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $50,000 and matures in 20 years. T
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Answer

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The answer and procedures of the exercise are attached in the following archives.

Step-by-step explanation:

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

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3 years ago
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