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12.1 Middletown clinic had total assets of $500,000 and an equity balance of $350,000 at the end of 2015. One year later at the end of 2016 the clinic had $575,000 in assets and$380,000 in equity. What was the clinic dollar growth in assets during 2016 and how was this growth financed?
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- CALCULATING THE WACC Here is the condensed 2016 balance sheet for Skye Computer Company (in thousands of dollars): 2016 Current assets 2,000 Net fixed assets 3,000 Total assets 5,000 Accounts payable and accruals 900 Short-term debt 100 Long-term debt 1,100 Preferred stock (10,000 shares) 250 Common stock (50,000 shares) 1.300 Retained earnings 1,350 Total common equity 52,650 Total liabilities and equity 5,000 Skyes earnings per share last year were 3.20. The common stock sells for 55.00, Last year's dividend (Do) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skye's preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firm's before-tax cost of debt is 10%, and its marginal tax rate is 35%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and Long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between rc and rs. as determined by the DCF method, and add that differential to the CAPM value for rs) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity? (2) If it expands so rapidly that it must issue new common stock?As of December 31, 2015, Lincolnshire Company had assets of $1,850,000 and liabilities of $570,000. During 2016, the stockholders invested an additional $100,000 and paid dividends of $60,000 from the business. What is the net income for the company during 2016, assuming that as of December 31, 2016, assets were $1,960,000, and liabilities were $510,000? Group of answer choices A) $170,000 B) $130,000 C) $210,000 D) $40.000• A firm has liabilities of ₱30,000 and owner’s capital of ₱90,000. Find the percentage of total liabilities to total assets. • A firm had owner’s capital of ₱150,000 in 2013 and ₱187,500 in 2014. Find the increase in owner’s capital from 2013 to 2014. • If long-term liabilities are ₱300,000 and total assets are ₱2,100,000, what percentage of total assets are long-term liabilities?
- Booker Inc. is a distributor of building supplies. Management for the company has developed the following forecasts of net income: Table 8 Forecasted Net Income of Booker Inc. in USD (As of December 31st of each year) Year Forecasted Net Income 2011 $111,432 2012 $131,490 2013 $156,473 2014 $178,379 2015 $199,784 Management expects net income to grow at a rate of 7% per year after 2015 and the company's cost of equity capital is 14%. Management has set a dividend payout ratio equal to 25% of net income and plans to continue this policy. Booker’s common shareholders' equity at January 1, 2011, is $544,902. Using the residual income model, compute the value of equity of Booker as of January 1, 2011. Using the dividend discount model, compute the value of equity of Booker as of January 1, 2011. Compare the results in parts (a) and (b) and discuss possible reasons for any discrepancies.Central Bank has the following information (in $million). 2017 ($ million) 2018 ($ million) Revenue 780 890 Net income 240 375 Assets 22,450 27,850 Equity 2,250 2,980 Which of the following statements about Central Bank is CORRECT? Select one: a. From 2017 to 2018, its Return on Equity decreased, Return on Assets decreased, and Leverage Multiplier increased. b. From 2017 to 2018, its Return on Equity increased, Return on Assets increased, and Leverage Multiplier decreased. c. From 2017 to 2018, its Return on Equity increased, Return on Assets increased, and Leverage Multiplier increased. d. From 2017 to 2018, its Return on Equity increased, Return on Assets decreased, and Leverage Multiplier increased.The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $5.7 million, and the 2018 balance sheet showed long-term debt of $5.9 million. The 2018 income statement showed an interest expense of $190,000. During 2018, the company had a cash flow to creditors of –$10,000 and the cash flow to stockholders for the year was $70,000. Suppose you also know that the firm’s net capital spending for 2018 was $1,420,000, and that the firm reduced its net working capital investment by $79,000. What was the firm’s 2018 operating cash flow, or OCF
- Paladin Furnishings generated $4 million in sales during 2016, and its year-end total assets were $3.2 million. Also, at year-end 2016, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.80 for every $1.00 increase in sales. Paladin's profit margin is 5%, and its retention ratio is 40%. How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. $Volbeat Corp. shows the following information on its 2015 income statement: sales = $255,000; costs = $156,000; other expenses = $7,900; depreciation expense = $15,600; interest expense = $14,800; taxes = $21,245; dividends = $12,000. In addition, you're told that the firm issued $6,300 in new equity during 2015 and redeemed $4,800 in outstanding long-term debt. a. What is the 2015 operating cash flow? b. What is the 2015 cash flow to creditors? c. What is the 2015 cash flow to stockholders?On December 31, 2015, the net assets of Martinez Manufacturing amounted to $40,000. Net income calculated by using the financial capital maintenance concept amounted to $12,000. During the year, additional common stock was issued for $8,000, and $5,000 of dividends was paid. The net assets at January 1, 2015, amounted to $20,000. $25,000. $31,000. $37,000.
- The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $5.2 million, and the 2018 balance sheet showed long-term debt of $5.4 million. The 2018 income statement showed an interest expense of $165,000. During 2018, the company had a cash flow to stockholders for the year was $70,000. Suppose you also know that the firm’s net capital spending for 2018 was $1,370,000, and that the firm reduced its net working capital investment by $69,000. What was the firm’s 2018 operating cash flow, or OCF? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)At the end of the year, the owners' equity in Scott Mfg. amounted to $845,000. During 2018, the assets of the business increased by $515,000 and the liabilities increased by $205,000. The owners' equity at the beginning of 2018 was how much?Higgins Company has been operating for one year (2014). You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. At the start of 2015, Higgins’s T-account balances were as follows: Assets: Cash Short-Term Investments Property and Equipment 4,400 2,600 3,200 Liabilities: Short-Term Notes Payable Long-Term Notes Payable 1,500 390 Stockholders’ Equity: Common Stock Additional Paid-in Capital Retained Earnings 660 2,640 5,010 The following transactions occured in 2015: (a) Borrowed $3,100 from a local bank, signing a note due in three years. (b) Sold $1,400 of the investments for $1,400 cash. (c) Sold one-half of the property and equipment for $1,600 in cash. (d) Declared and paid $360 in cash…