Vega Case

Debt to Equity Ratio of 1.23 more than 1 reveals that more than half of assets are financed by debt.

The company’s leverage ratio is 28% - 72% of its assets are financed by common equity and the company was profitable in the last reporting period. The company should easily raise additional funds from creditors and a convertible debenture will be an appealing venture for creditors who would want to purchase stocks of the company in the future.

I believe that Adrian Vega is in no way guilty beyond a reasonable doubt. Quinn Liu’s testimony is unreliable. He says that he didn’t see the passenger in the car that night. Three out of four streetlights were out. How could he not see the passenger, when he was standing on his porch looking at the passenger side of a car on the street? And how could he identify the color of a shirt in low light, differentiating light blue from white in the yellowy light of a streetlamp? The only conclusion is that he was either embellishing what he saw or making things up. That makes his testimony unreliable, and if his testimony was the basis for the prosecution’s case, that means that their case was build on a faulty ground. Tony DeLuca was jealous, and

California Surf Clothing Company issues 1,300 shares of $7 par value common stock at $22 per share. Later in the year, the company decides to repurchase 130 shares at a cost of $35 per share.

Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.

24) A firm has assets of $250 million, of which $25 million is cash. It has debt of $100 million. If the firm were to repurchase $10 million of its stock, what would its new debt-to-equity ratio be?

The startup plan was developed on a small budget, however; the company has managed to develop and keep expanding. If the results are conclusive and a loan application is approved this will allow the company to meet new needs as they arise. This will include the building of new locations, updated computers, cash registers, and a rewards system for the loyal guests.

Taking the CAPM equation, we were able to figure out eh cost of equity and in its credit range

Using the AFN equation, it was calculated (assuming there were no dividends paid, and that sales were expected to grow to $3.6 million) that the amount of extra funding needed would be approximately $76,360. This amount would

Thus the WAVG Cost of Debt (including L/T debt and preferred stock) = rd = 8.633%

And we calculated the weight of debt which was Weight of debt for P&S= [(13.1%+5.3%)/2]= 9.2%

5. As a shareholder, how would you approve the VEP? Would you elect cash or stock?

Weight of Equity = 71%; Equity Cost of Capital = 12%; Weight of Debt = 29%; Debt Cost of Capital = 4.55%

2. New bank credit facility, 600 million cash on hand to take advantage of opportunities that may arise

They will end up with 6.3 billion external funding needed. While in the long-term, the operating cash flow increased but the capital expenditure increased also. They actually will end up with 6.6 billion dollar needed to finance.