Firm A and B have total debt ratios of 45% and 35% and ROA of 10% and 15%. Which firm has a greater ROE? A Firm A with ROE of 0.23 B) Firm B with ROE of 0.23 C) Firm A with ROE of 0.16 D) Firm B with ROE of 0.16
Q: required by the market for a portfolio with a beta of 1 is 13.0%. According to the capital asset…
A: Risk free rate=6%Rate of return with beta 1=13.0%Dividend next=$9Price=$105
Q: Consider the following three bond quotes: a Treasury note quoted at 98.84, a corporate bond quoted…
A: Bonds are debt instruments issued by entities like companies and government entities like…
Q: James Clark is a foreign exchange trader with Citibank. He notices the following quotes: Spot…
A: Spot exchange rate = USD1.2051/CHFSix-month forward exchange rate = USD1.1922/CHFSix-month $…
Q: Wallace Driving School's 2020 balance sheet showed net fixed assets of $3.8 million, and the 2021…
A: The difference between a company's capital expenditures (CapEx) and depreciation is referred to as…
Q: Usher Sports Shop had cash flows from investing activities of -$4,464,000 and cash flows from…
A: Cash flow from operations refers to the cash generated from the operating activities in the business…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: The objective of the question is to calculate the standard deviation of the portfolio and the…
Q: You are considering making a movie. The movie is expected to cost $10.1 million up front and take a…
A: The payback period is an easily comprehensible and basic statistic. It offers a brief evaluation of…
Q: a) You deposit $200 monthly into an annuity with the goal of accumulating $180,000 after 30 years.…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: e cash flow is Question 4Select one: Cash flow from operations plus investment Cash flow from…
A: Efficient management of cash flow is vital for any business to thrive. One crucial aspect of…
Q: Suppose Jorge Otero has set up an annuity due with a certain credit union. At the beginning of each…
A: Compound = Monthly = 12Payment = p = $140Interest rate = r = 6 / 12 = 0.5%Time = t = 17Payment Type…
Q: What kind of interest rate swap would a commercial bank with a negative re - pricing gap (that is,…
A: We have to find out an appropriate kind of interest rate swap for a commercial bank with a negative…
Q: Suppose that ABSs are created from portfolios of subprime mortgages with the following allocation of…
A: Portfolio is a set of assets or securities to gain maximum return with minimum risk. The weights of…
Q: The New Fund had average daily assets of $2.7 billion in the past year. New Fund's expense ratio was…
A: Direct expenses include operating costs related to the day-to-day management and support of the…
Q: Problem 4-1 You are trying to decide how much to save for retirement. Assume you plan to save $4000…
A: Annual savings = $4000Investment return = 5%Work years =43Retirement horizon =20 yearsTo find: a)…
Q: You are considering a new product launch. The project will cost $950,000, have a four-year life, and…
A: Net Present Value:The term "net present value" refers to the distinction between the present value…
Q: P3 Operating cash flows. Strong Tool Partners has been considering purchasing a new lathe to replace…
A: (1) Operating Cash Inflows associated with New lathe:(2) Operating Cash Inflows associated with Old…
Q: If the revenue last quarter was 3.87 million BRL and the expenses were 2.73 million USD, then what…
A: Profit margin = Profit / RevenueProfit = Revenue × Profit marginProfit = 3.87 million × 9.1%Profit =…
Q: adjustments. What is the duration estimated price change (in dollars,$) when the announcement is…
A: A bond's price is determined by the bond's future cash flows, which include periodic interest…
Q: 1. MARCELA HAS A CAPITAL OF $200,000.00, SHE INVESTS 30% OF HER CAPITAL AT 6.5% QUARTERLY AND THE…
A: Interest represents the cost of borrowing money or the earnings from lending. Simple interest is a…
Q: of 13.7% and the US treasury bill rate is 1.53% p.a., what is the expected return on the market for…
A: The capital asset pricing model aids analysts and investors in calculating the expected return on…
Q: Security 1-yr Treasury 5-yr Treasury 10-yr Treasury 5-yr Corporate (rated A) Coupon Rate 0.00% 4.50%…
A:
Q: (Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is…
A: Expected return is calculated as follows:-Expected return = whereR= Return of stockP= Probability of…
Q: 1. A loan with the following terms is being made: Fixed rate, constant payment 9% interest rate…
A: Given information:Mortgage loan amount is $70,000Extra payment as discount point $1,500Number of…
Q: Kauai Tools Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The…
A: Businesses should take variable manufacturing overhead expenses into account when calculating the…
Q: Consider borrowing $250,000 to purchase a house at a 4% annual interest rate to be paid in full in…
A: The debt amortization schedule refers to the table that showcases the interest and principal…
Q: LO, Inc., is considering an investment of $443,000 in an asset with an economic life five years. The…
A: Initial cashflow is investments required in equipments and working capital and is negative cash flow…
Q: You must type in both the answer and all of your work to receive credit. Use the financial…
A: Operating income=1200Taxes=275Capital expenses=$500Depreciation=400
Q: ZZ Industries: Price 34.36 Calls: Strike Symbol Last Chg Bid Ask 30.00 ZZBF 4.30 1.07 4.30 4.40…
A: Number of shares = 300Strike price = $32.50Ask price = .01
Q: QUESTION:How do investors make decision to invest into a portfolio which is the combination of 2…
A: The correlation coefficient shows relationship between the 2 variables.
Q: You are scheduled to receive $27,000 in two years. When you receive it, you will invest it for 7…
A: Future value is that amount which will be require to paid at some specified period of time. It…
Q: Rbonds F-P P if the market price of a $1,000-face-value discount bond changes from $925 to $950, the…
A: Yield to maturity refers to the percentage of return an investor expects from an investment in a…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Return on money market fund = 6%Return on stock fund = 24%Return on bond fund = 14%Standard…
Q: At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: A lease is defined as a contractual agreement incorporated between two business entities where one…
Q: Ratios Calculated Year 1 Year 2 5.20 Inventory turnover 10.40 Debt-to-equity 0.70 Price-to-cash-flow…
A: Financial ratios are based on the relationship between two financial line items. For instance the…
Q: A firm has invested $700 in a new machine that is expected to last for the next 5 years. The machine…
A: Free cash flow is that amount which is earned by the investor from the project. It is the net amount…
Q: Ronald plans to make regular savings contributions of $9,860.00 per year. His first regular savings…
A: Payment = p = $9860Number of Payment = n = 12Value in year 5 = v = $52,400Interest Rate = r =…
Q: Green Power Company is considering acquiring a new machine that will last 14 years and it can be…
A: NPV stands for Net Present Value, which is a fundamental concept in finance and investment analysis.…
Q: You are looking to purchase a Tesla Model X sport utility vehicle. The price of the vehicle is…
A: Balloon payment is the final payment made at the end of loan to close and settle the loan and close…
Q: 4-30. Last week Evelyn moved into the new house she purchased, and she is already making plans to…
A: Loan installment is that which is paid by borrower to lender for a specified period of time. This…
Q: Determine the interest rate (i) that makes the pairs of cash flows shown economically equivalent.…
A: To Find:Interest rate at which both pair of cash flows are economically equal
Q: EX.01-228 Using the following accounting equation elements and their balances, prepare, in good…
A: The Income statement is a financial statement that shows the Incomes and expenses of a company…
Q: 3. Congratula However, actually ar cost is 6% made imm
A: Prize value = $1,000,000Annual payment = $25,000Interest rate = 6%Number of years = 40 years
Q: You need to accumulate $10,000. To do so, you plan to make deposits of $1,300 per year with the…
A: The FV of an investment refers to the combined value of the cash flows of the investment after they…
Q: You deposit $700 each month into an account earning 3% interest compounded monthly. a) How many…
A: Future value is the amount that existing assets are worth at a specific future date after they have…
Q: percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to…
A: Payoff in success = $33,600,000Payoff in failure = $11,600,000Probability of success = 40%…
Q: a) Show the cash flows for the following four bonds, each of which has a par value of $1,000 and…
A: Compound = Semiannually = 2Face Value = fv = $1000Coupon Rate = c = 9 / 2 = 4.5%Time = t = 4 * 2 =…
Q: To establish a "rainy day" cash reserve account, a certain company deposits $11,000 of its profit at…
A: The future value of an annuity is the total value of all periodic payments made into the annuity,…
Q: A $5000 loan at 10% compounded annually is to be repaid by two payments three and five years from…
A: Loan amount = $5000First payment = $3000Required rate of return =9%To find: The purchase price for…
Q: Solve the following LP Shelby Shelving is a small company that manufactures two types of shelves…
A: This is a case of LP problem i.e. linear programming problem. We need to formulate a LP situation…
Q: a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in…
A: The coefficient of variation is a tool for evaluating the relative risk of various investments or…
Step by step
Solved in 3 steps with 2 images
- Garwryk, inc., which is finance with debt and equity, presently has a debt ratio of 78 percent. What is the firm’s equity multiplier? How is the equity multiplier related to the firm’s use of debt financing (i.e., if the firm increased its use of debt financing would this increase or decrease its equity multiplier)? Explain What is the firm’s multiplier? The equity multiplier is given by: Equity multiplier =1 1-debt ratio The equity multiplier is Round to two decimal placesFama’s Llamas has a weighted average cost of capital of 10.4 percent. The company’s cost of equity is 13 percent and its pretax cost of debt is 7.9 percent. The tax rate is 24 percent. What is the company's debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Debt-equity ratio:______?Fama’s Llamas has a weighted average cost of capital of 8.4 percent. The company’s cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company’s target debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
- Garwryk, inc., which is financed with debt and equity, presently has a debt ratio of 78 percent. What is the firm’s equity multiplier? How is the equity multiplier related to the firm’s use of debt financing (i.e., if the firm increased its use of debt financing would this increase or decrease its equity multiplier)? Explain How is the multiplier related to the firm’s use of debt financing (i.e., if the firm’s increase its use of debt financing would this increase or decrease its equity multiplier)? ExplainAlpha Corporation has average annual free cashflows to the equity holder and to the firmof P3,000,000 and P3,350,000 respectively. Assuming that the weighted average cost ofcapital and actual return of on assets is 16.75% while the market return on Alpha's debt is7%, what is the value of its equity? a. P34,358,974.36 b.P15,000,000.00 c.P17,910,447.76 d.P20,000,000.00Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decima) places.) b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.)
- Oblib Inc. has a debt-equity ratio of 2, and a weighted average flotation cost of 4%. What is the dollar flotation cost if the company were to raise $1.5 million in the capital market? Please if you can, show all calculationsUsing the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 5 percent and its return on assets (investment) is 22.5 percent. What is its assets turnover? (Round your answer to 2 decimal places.) b. If the Butters Corporation has a debt-to-total-assets ratio of 55.00 percent, what would the firm's return on equity be? (Input your answer as a percent rounded to 2 decimal places.) c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 50.00 percent? (Input your answer as a percent rounded to 2 decimal places.)The cost of debt for firm XYZ is 6%. It's tax rate is 40%. The cost of retained earnings is 12% and the cost of external common equity is 14%. Retained earnings is $5000. The target capital structure calls for 45% debt and 55% equity. Compute the following:A. Retained earnings break point B. WACC below the RE break pointC. WACC above the RE break point
- National Co. has a debt to equity ratio of 25% and a weighted average cost of capital at 25%. The firm used the capital asset pricing model approach based on the variables readily and reliably available to determine the cost of equity. The weighted cost of equity is 18%. If the applicable tax rate is 30%, the before-tax cost of debt is (Format: XX.XX%)Ursala, Incorporated, has a target debt-equity ratio of 1.25. Its WACC is 8.4 percent and the tax rate is 23 percent. If the company’s cost of equity is 12.4 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 3.6 percent, what is the cost of equity?Jack Corp. has a profit margin of 3.5 percent, total asset turnover of 2.9, and ROE of 18.58 percent. What is this firm’s debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)