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17. XYZ's balance sheet and income statement are given below: Balance Sheet Cash 50 Accounts payable 100 A/R 150 Notes payable Inventories 300 Long-term debt (10%) 700 Fixed assets 500 Common equity (20 shares) 200 Total assets 1,000 Total liabilities and equity 1,000 Income Statement Sales 1,000 Cost of goods sold 855 ЕBIT 145 Interest 70 ЕВT 75 Taxes (33.33%) 25 Net income 50 The industry average inventory turnover is 5, the interest rate on the firm's long-term debt is 10 percent, 20 shares are outstanding, and the stock sells at a P/E of 8.0. If XYZ changed its inventor methods so as to operate at the industry average inventory turnover, if it used the funds generated b this change to buy back common stock at the current market price and thus to reduce common equity and if sales, the cost of goods sold, and the P/E ratio remained constant, by what dollar amount would

17. XYZ's balance sheet and income statement are given below: Balance Sheet Cash 50 Accounts payable 100 A/R 150 Notes payable Inventories 300 Long-term debt (10%) 700 Fixed assets 500 Common equity (20 shares) 200 Total assets 1,000 Total liabilities and equity 1,000 Income Statement Sales 1,000 Cost of goods sold 855 ЕBIT 145 Interest 70 ЕВT 75 Taxes (33.33%) 25 Net income 50 The industry average inventory turnover is 5, the interest rate on the firm's long-term debt is 10 percent, 20 shares are outstanding, and the stock sells at a P/E of 8.0. If XYZ changed its inventor methods so as to operate at the industry average inventory turnover, if it used the funds generated b this change to buy back common stock at the current market price and thus to reduce common equity and if sales, the cost of goods sold, and the P/E ratio remained constant, by what dollar amount would

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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17. XYZ's balance sheet and income statement are given below: Balance Sheet Cash 50 Accounts payable 100 A/R 150 Notes payable Inventories 300 Long-term debt (10%) 700 Fixed assets 500 Common equity (20 shares) 200 Total assets 1,000 Total liabilities and equity 1,000 Income Statement Sales 1,000 Cost of goods sold 855 EBIT 145 Interest 70 EBT 75 Taxes (33.33%) 25 Net income 50 The industry average inventory turnover is 5, the interest rate on the firm's long-term debt is 10 percent, 20 shares are outstanding, and the stock sells at a P/E of 8.0. If XYZ changed its inventory methods so as to operate at the industry average inventory turnover, if it used the funds generated by this change to buy back common stock at the current market price and thus to reduce common equity, and if sales, the cost of goods sold, and the P/E ratio remained constant, by what dollar amount would its stock price increase?
Transcribed Image Text:17. XYZ's balance sheet and income statement are given below: Balance Sheet Cash 50 Accounts payable 100 A/R 150 Notes payable Inventories 300 Long-term debt (10%) 700 Fixed assets 500 Common equity (20 shares) 200 Total assets 1,000 Total liabilities and equity 1,000 Income Statement Sales 1,000 Cost of goods sold 855 EBIT 145 Interest 70 EBT 75 Taxes (33.33%) 25 Net income 50 The industry average inventory turnover is 5, the interest rate on the firm's long-term debt is 10 percent, 20 shares are outstanding, and the stock sells at a P/E of 8.0. If XYZ changed its inventory methods so as to operate at the industry average inventory turnover, if it used the funds generated by this change to buy back common stock at the current market price and thus to reduce common equity, and if sales, the cost of goods sold, and the P/E ratio remained constant, by what dollar amount would its stock price increase?
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