Castillo Mini Case 2 Essay
Short-term bank loans are available at an 8 percent interest rate. Cindy and Rob believe that the cost of obtaining long-term debt and equity capital will be somewhat higher. The real interest rate is estimated to be 2 percent, and a long-run inflation premium is estimated at 3 percent. The interest rate on …show more content…
F. Would you recommend to Cindy and Rob that they use the book value–based WACC estimate or the market value–based WACC estimate for planning purposes? Why?
[pic]
.:.
SOLUTION:
(a) 2009 net profit margin = -65,000/900,000 = -.0722 = -7.22% 2010 net profit margin = 75,000/1,500,000 = .500 = 5.00%
2009 total-sales-to-total-assets = 900,000/1,000,000 = .9000 times 2010 total-sales-to-total-assets = 1,500,000/1,200,000 = 1.2500 times
2009 equity multiplier = 1,000,000/(150,000 + 200,000 + 80,000) = 1,00,000/430,000 = 2.3256 times 2010 equity multiplier = 1,200,000/(150,000 + 200,000 + 120,000) = 1,200,000/470,000 = 2.5532 times
2009 return on equity = -65,000/430,000 = -.1522 = -15.22% 2010 return on equity = 75,000/470,000 = .1596 = 15.96%
Castillo Products improved from an operating loss in 2009 to profitability in 2010. The net profit margin went from negative to positive. The asset turnover (total-sales-to-total-assets)
-
Mini Case University Essay
854 Words | 4 Pages9/25/12 Chapter 5 Mini-case MIS-589-19217 Armando Gomez II. Central University Suppose you are the network manager for Central University, a medium-size university with 13,000 students. The university has 10 separate colleges (e.g., business, arts, journalism), 3 of which are relatively large (300 faculty and staff members, 2,000 students, and 3 buildings) and 7 of which are relatively small (200 faculty and staff, 1,000 students, and 1 building). In addition, there are another 2,000 staff members…
-
Sustainment of The Mini Cases of the Industry
2205 Words | 9 PagesTrident University International Willie Bates Module 2 Case ITM524: Foundations of Information Technology Management Dr. Mina Richards Introduction We live in an environment which changes often. In the business world, what is in demand today for an organization may not be a requirement for tomorrow. Smart managers know that organizations that succeed do so because they adjust to keep up with the changes that are taking place (Harmon, 2007). Change in business comes…
-
Fin 516 Mini Case Week 2 Essay
731 Words | 3 PagesHome Depot Fiscal year end of Jan. 29, 2012 1. What is the name of the company? Home Depot. What is the industry sector? Home Improvement Retailer. 2. What are the operating risks of the company? * Uncertainty regarding current economic conditions. * Competition. * Timely identifying changes in demand. * Relationships with suppliers and disruptions in the supply chain. * Failure of key information technology or process; including customer facing and privacy disruptions…
-
Answers to Mini-Case Questions
1823 Words | 8 Pages( Answers to Mini-Case Questions BioCom Inc. This mini-case provides a review of the methodology and rationale associated with the various capital budgeting evaluation methods such as payback period, discounted payback period, NPV, IRR, MIRR, and PI. 1. Compute the payback period for each project. |Time of Cash Flow |Nano Test Tubes |Microsurgery Kit | |Investment |−$11,000.00 |−$11,000.00…
-
Mini Case
1561 Words | 7 Pagessolutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else. CASE 13–30 Make or Buy; Utilization of a Constrained Resource [LO1, LO3, LO5] Garrison, Noreen & Brewer. 13th edition Managerial Accounting. Entire case.TufStuff, Inc., sells a wide range of drums, bins…
-
Finance-Mini Case
1123 Words | 5 PagesChapter 8. Mini-Case Assume that you have just been hired as a financial analyst by Triple Play Inc., a mid-sized California company that specializes in creating high-fashion clothing. Because no one at Triple Play is familiar with the basics of financial options, you have been asked to prepare a brief report that firm’s executives can use to gain a cursory understanding of the topic. To begin, you gathered some outside materials on the subject and used these materials to draft a list of pertinent…
-
Fm11 Ch 11 Mini Case
2240 Words | 9 Pages6/14/2003 Chapter 11 Mini Case Situation Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line would be set up in unused space in Shrieves ' main plant. The machinery’s invoice price would be approximately $200,000; another $10,000 in shipping charges would be required; and it would cost an additional $30,000 to install the equipment. The machinery has…
-
Chapter 15 Mini Case
1672 Words | 7 PagesChapter 15. Mini Case | | | | | | | | | | | | | | | | | | | | | | Situation | | | | | | | | | | | | | | | Assume you have just been hired as a business manager of PizzaPalace, a regional pizza restaurant chain. The company’s EBIT was $50 million last year and is not expected to grow. The firm is currently financed with all equity and it has 10 million shares outstanding. When you took your corporate finance course, your instructor stated that most firms’ owners…
-
Essay on Mini Case Starbucks
779 Words | 4 PagesMINI CASE 4 I STARBUCKS: RE-CREATING ITS UNIQUENESS 1. How did Starbucks create its uniqueness in the first place? Starbucks create its uniqueness by offering premium coffee beans, thus creating an amazing image. Every store is a unique place with a wide range of products and a special homely ambience, emphasized by relaxing music and comfortable seating furniture. Other than that, customers can use the free wireless hotspot or just visit with friends. The high quality of the products…
-
Mini Case
965 Words | 4 PagesiMINICASE STUDY #2 Unforeseen Opportunity in an Election You are in charge of the advertising staff for Cindy Smith 's election campaign. Cindy is trying to prevent the eight term incumbent, Jesse Jones, from getting another term in the U.S. House of Representatives. Cindy decided to run against Jesse because he wrote 150 bad checks in the House banking scandal, voted to not disclose the names of the people involved in the scandal, and voted to give himself a substantial pay raise at taxpayers’…
More about Castillo Mini Case 2 Essay
-
Mini Case University Essay
854 Words | 4 Pages -
Sustainment of The Mini Cases of the Industry
2205 Words | 9 Pages -
Fin 516 Mini Case Week 2 Essay
731 Words | 3 Pages -
Answers to Mini-Case Questions
1823 Words | 8 Pages -
Mini Case
1561 Words | 7 Pages -
Finance-Mini Case
1123 Words | 5 Pages -
Fm11 Ch 11 Mini Case
2240 Words | 9 Pages -
Chapter 15 Mini Case
1672 Words | 7 Pages -
Essay on Mini Case Starbucks
779 Words | 4 Pages -
Mini Case
965 Words | 4 Pages