ky’s total assets are $200 million, and its liabilities other than the bonds payable are $90 million. The company is considering some additional financing through leasing. Required:
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Chunky Cheese Pizza has $60 million in bonds payable. The bond agreement states that the debt to equity ratio cannot exceed 3.02. Chunky’s total assets are $200 million, and its liabilities other than the bonds payable are $90 million. The company is considering some additional financing through leasing.
Required:
1. Calculate total
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- Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $25 million in long-term debt. What is the debt ratio?Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.Broom Co. has a total debt of $420,000 and shareholders’ equity of $700,000. Broom is seeking capital to fund an expansion. Broom is planning to issue an additional $300,000 in common stock, and is negotiating with a bank to borrow additional funds. The bank is requiring a debt-to-equity ratio of 0.75. what is the maximum additional amount Broom will be able to borrow?
- MV Corporation has debt with market value of $95 million, common equity with a book value of $101 million, and preferred stock worth $22 million outstanding. Its common equity trades at $45 per share, and the firm has 5.6 million shares outstanding. What weights should MV Corporation use in its WACC? The debt weight for the WACC calculation is __ % ? (Round to two decimal places.)The Supple Hardware Company has $2,000,000 in current assets and $600,000 in current liabilities. Its initial inventory level is $450,000, and it will raise funds as additional short-term notes payable and use them to increase inventory. How much can Supple's current liabilities (notes payable) increase without violating a contractual agreement (the debt covenant) with its bondholders that requires a minimum current ratio of 2 to 1? Compute the dollar value of 1) inventory, 2) total current assets, and 3) total current liabilities after the maximum new financing has been obtained and the funds allocated.Fresh Products Co. has P5 million in current assets, P3 million in current liabilities, and its initial inventory level is P1 million. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company’s bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants?
- ZZZ company has $27 million of current assets and $29 million of noncurrent assets. It forecasts an EBIT of $5.2 million and pays income taxes at a 21% rate. Short-term bank notes carry a 4% interest rate, and the company can issue long-term bonds at 7%. The company has set a target debt ratio of 45%. Required: A. For a maturity mix of 60% current and 40% long-term debt, prepare the company's abbreviated balance sheet. B. For a maturity mix of 60% current and 40% long-term debt, prepare the company's financial half of its income statement. C. Based on the financial statements above, calculate the (1) return on equity ratio and the (2) current ratio in order to evaluate the company's risk and return. I also would love to see the excel formulas pleaseLuxembourg Port Co. has assets of €100 million (including €10 million in cash) and debt of €20 million. If the company borrows an additional €10 million to repurchases €20 million of stock, what is the new debt-to-equity ratio?AAA Inc. has a current debt-to-equity ratio of 3, and is considering expanding its operations into a new industry. Firms in this new industry face a different set of risks than AAA Inc. However, the executives at AAA Inc. observe that a company in the new industry (BBB Inc.) has a cost of equity of 14%, a cost of debt of 7%, and a debt-to-value ratio of 40%. AAA Inc. plans to finance its expansion into the new industry with 50% debt and 50% equity. The cost of debt for AAA Inc. is also 7%, and the corporate tax rate is 25%. Solve for the discount rate that AAA Inc. should use when evaluating whether to go forward with the expansion
- Epiphany is an all-equity firm with an estimated market value of $400,000. The firm sells $225,000 of debt and uses the proceeds to purchase outstanding equity. Compute the weight in equity and the weight in debt after the proposed financing and repurchase of equity.National Co. has P5,000,000 in current assets, P3,000,000 in current liabilities, and its initial inventory level is P1,000,000. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company’s bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants?LexMart maintains a debt-to-equity ratio of 1.0 regardless of whether the firm experiences expansion or contraction. At the present time, LexMart has $1,000 par value bonds outstanding that pay 8% annual interest. The firm also has 2.3 million shares of common stock outstanding that sells for $22 per share. a. Based on LexMart's current annual NOP of $21,500,000 and its corporate tax rate of 25%, what is its EPS? b. If LexMart would like to finance a $64 million expansion while maintaining it's current debt-to-equity ratio of 1.0, how many bonds at $1,000 per bond and shares of stock will it have to sell to pay for the expansion? c. After the expansion, what level of annual NOP will LexMart have to generate to maintain its current level of EPS?
