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Please help fill out the attached excel example to answer instructions of problem 13-13! Instead of just whoing the correct answers, can you please include the formula you used to get the answers so I can learn how to do the work! Thank you!

Please help fill out the attached excel example to answer instructions of problem 13-13! Instead of just whoing the correct answers, can you please include the formula you used to get the answers so I can learn how to do the work! Thank you!

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 5E: Investment Discount Amortization Schedule On January 1, 2019, Rodgers Company purchased 200,000 face...
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Please help fill out the attached excel example to answer instructions of problem 13-13! Instead of just whoing the correct answers, can you please include the formula you used to get the answers so I can learn how to do the work! Thank you! 

FINANCING ALTERNATIVES The Severn Company plans to raise a net amount of $270 mil- lion to finance new equipment in early 2020. Two alternatives are being considered: Common stock may be sold to net $60 per share, or bonds yielding 9% may be issued. The balance sheet and 13-13 income statement of the Severn Company prior to financing are as follows: The Severn Company: Balance Sheet as of December 31, 2019 (millions of dollars) Current assets $ 900.00 Notes payable $ 255.00 Net fixed assets 450.00 Long-term debt (7%) 697.50 Common stock, $1 par 60.00 Retained earnings 337.50 Total assets $1,350.00 Total liabilities and equity $1,350.00 The Severn Company: Income Statement for Year Ended December 31, 2019 (millions of dollars) Sales $2,475.00 Operating costs 2,103.75 Earnings before interest and taxes (15%) $ 371.25 Interest on short-term debt 10.50 Interest on long-term debt 48.83 Earnings before taxes $ 311.92 Federal-plus-state taxes (25%) 77.98 Net income $233.94 The probability distribution for annual sales is as follows: Probability Annual Sales (millions of dollars) 0.30 $2,250 0.40 2,700 0.30 3,150 Assuming that EBIT equals 15% of sales, calculate earnings per share (EPS) under the debt financ- ing and the stock financing alternatives at each possible sales level. Then calculate expected EPS and Opps under both debt and stock financing alternatives. Also calculate the debt-to-capital ratio and the times-interest-earned (TIE) ratio at the expected sales level under each alternative. The old debt will remain outstanding. Which financing method do you recommend? (Hint: Notes payable should be included in both the numerator and the denominator of the debt-to-capital ratio.)
Transcribed Image Text:FINANCING ALTERNATIVES The Severn Company plans to raise a net amount of $270 mil- lion to finance new equipment in early 2020. Two alternatives are being considered: Common stock may be sold to net $60 per share, or bonds yielding 9% may be issued. The balance sheet and 13-13 income statement of the Severn Company prior to financing are as follows: The Severn Company: Balance Sheet as of December 31, 2019 (millions of dollars) Current assets $ 900.00 Notes payable $ 255.00 Net fixed assets 450.00 Long-term debt (7%) 697.50 Common stock, $1 par 60.00 Retained earnings 337.50 Total assets $1,350.00 Total liabilities and equity $1,350.00 The Severn Company: Income Statement for Year Ended December 31, 2019 (millions of dollars) Sales $2,475.00 Operating costs 2,103.75 Earnings before interest and taxes (15%) $ 371.25 Interest on short-term debt 10.50 Interest on long-term debt 48.83 Earnings before taxes $ 311.92 Federal-plus-state taxes (25%) 77.98 Net income $233.94 The probability distribution for annual sales is as follows: Probability Annual Sales (millions of dollars) 0.30 $2,250 0.40 2,700 0.30 3,150 Assuming that EBIT equals 15% of sales, calculate earnings per share (EPS) under the debt financ- ing and the stock financing alternatives at each possible sales level. Then calculate expected EPS and Opps under both debt and stock financing alternatives. Also calculate the debt-to-capital ratio and the times-interest-earned (TIE) ratio at the expected sales level under each alternative. The old debt will remain outstanding. Which financing method do you recommend? (Hint: Notes payable should be included in both the numerator and the denominator of the debt-to-capital ratio.)
Net amount to be raised, millions USD 270 Common stock to be sold to net, per share 60.00 Par value of shares 1.00 60.00 64.50 Number of shares outstanding in millions when using debt Number of shares outstanding, with new issue Proposed bond yield EBIT as percentage of sales 0.0900 0.1500 Тахes 0.2500 Interest on long-term debt 0.0700 Interest on short-term debt 0.0412 Exponent "2" 2 Cell for "1" 1 Cell for "-1" -1 Probability distribution for annual sales Annual sales in Probability Use of Debt Use of Equity millions USD 0. 2,250 Probability 0.4 2,700 Sales 0.3 3,150 EBIT Interest EBT Balance Sheet as of December 31, 2019 Taxes (millions of dollars US) Net income Current assets 900.00 EPS Net fixed assets 450.00 TIE Total assets 1,350.00 Notes payable Long-term debt Common stock, $1.00 par Retained earnings Total liabilities and equity 255.00 Expected EPS 697.50 STDEV 60.00 CV 337.50 1,350.00 Еxpected TIE STDEV CV Income Statement Year Ended December 31, 2019 Total debt (millions of dollars US) Total capital Sales 2,475.00 Debt-to-capital Operating costs Earnings before interest and taxes 2,103.75 371.25 Interest on short-term debt 10.50 Interest on long-term debt 48 83 Earnings before taxes Federal-plus-state taxes 311.93 77.98 233.94 Net income Previous debt-to-capital Total debt Total capital Debt-to-capital
Transcribed Image Text:Net amount to be raised, millions USD 270 Common stock to be sold to net, per share 60.00 Par value of shares 1.00 60.00 64.50 Number of shares outstanding in millions when using debt Number of shares outstanding, with new issue Proposed bond yield EBIT as percentage of sales 0.0900 0.1500 Тахes 0.2500 Interest on long-term debt 0.0700 Interest on short-term debt 0.0412 Exponent "2" 2 Cell for "1" 1 Cell for "-1" -1 Probability distribution for annual sales Annual sales in Probability Use of Debt Use of Equity millions USD 0. 2,250 Probability 0.4 2,700 Sales 0.3 3,150 EBIT Interest EBT Balance Sheet as of December 31, 2019 Taxes (millions of dollars US) Net income Current assets 900.00 EPS Net fixed assets 450.00 TIE Total assets 1,350.00 Notes payable Long-term debt Common stock, $1.00 par Retained earnings Total liabilities and equity 255.00 Expected EPS 697.50 STDEV 60.00 CV 337.50 1,350.00 Еxpected TIE STDEV CV Income Statement Year Ended December 31, 2019 Total debt (millions of dollars US) Total capital Sales 2,475.00 Debt-to-capital Operating costs Earnings before interest and taxes 2,103.75 371.25 Interest on short-term debt 10.50 Interest on long-term debt 48 83 Earnings before taxes Federal-plus-state taxes 311.93 77.98 233.94 Net income Previous debt-to-capital Total debt Total capital Debt-to-capital
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