ssume that a farmer has $223,500 in Total Assets and $90,500 in Owner Equity, faces a 15% income tax rate, and a 20% consumption rate. Further, assume that the interest rate is 12.5%. What is the rate-of-return on assets if the growth rate is 10.5%?
Q: An A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million,…
A: 1) Computation of DOL, DFL, DCL is as follows:DOL=Sales -Variable costSales -variable cost-fixed…
Q: An enterprise with a profit before interest and tax of 150,000, a compound leverage level of 3 and a…
A: Compound Leverage =3 Financial Leverage = 1.5 Current Profit before interest and tax =150000…
Q: A company has two investment possibilities, with the following cash inflows: If the firm can earn 7…
A: We need to use the concept of time value of money to solve the question. According to the concept of…
Q: A company finances its operations with 60 percent debt and the rest using equity. The annual yield…
A: Given: Debt (D) = 60% Equity (E) = 40% Cost of debt (rd) = 4.1% Cost of equity (re) = 12.4% Tax =…
Q: Suppose you sell a fixed asset for $85,000 when it's book value is $100,000. If your company's…
A: Calculation of After-tax Cash Flow:The after-tax cash flow is $88,150.Excel Spreadsheet:
Q: Wilde Software Development has a 12% unlevered cost of equity. Wilde forecasts the following…
A: Interest tax shield is treated as inflow for the company as it is the amount of tax reduction…
Q: Fast Securities Ltd is looking into an investment of $100,000. The investment is expected to…
A: Economic value added (EVA) is a measure of a company's financial performance based on the residual…
Q: An investor is considering investing in one of two firms (C and D). The WACC is 12% and the…
A: C firm is stronger compared to firm D.
Q: A firm has total interest charges of $10,000 per year, sates of $1 million, a tax rate of 40…
A: Times interest earned ratio or interest coverage ratio shows ability of the company in paying it's…
Q: Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000, and its tax…
A: DFL means how much the earnings of a firm change due to change in the debt-equity ratio of the firm.…
Q: Suppose you sell a fixed asset for $99,000 when its book value is $75,000. If your company's…
A: The fixed assets are reflective of all such assets which are helpful for company in the deriving the…
Q: ompany has a required rate of return of 12% and a tax rate of 35%. What is the haximum dollar amount…
A: Answer: Equal installment = $ 300000 time period = 40years Interest rate = 12%
Q: Suppose you sell a fixed asset for $10,000 when its book value is $2,000. If your company's marginal…
A: Sale Price = $10,000 = SP Book Value = BV = $2,000 Tax Rate = t = 21% After-Tax Cash Flow from Sale…
Q: With a firm’s sales revenue of $500,000 and earnings before interest and tax (EBIT) $100,000 and…
A: The Times Interest Earned (TIE) ratio measures a company’s ability to meet its debt obligations…
Q: It is known that a firm’s Net Operating Profit After Tax (NOPAT) is $58,000 and its Economic Value…
A: We need to use EVA equation below to calculate WACC EVA =Net Operating Profit After Tax (NOPAT)…
Q: Suppose you sell a fixed asset for $126,000 when it's book value is $157,000. If your company's…
A: The computation of after tax cash flow is as follows:Hence, the after tax cash flow is $136850.
Q: Fusion Packaging is financed with 55% equity and 45% debt. The required rate of return on its debt…
A: Weight of equity (We) = 55% Weight of debt (Wd) = 45% Cost of debt (Rd) = 4.4% Cost of equity (Re) =…
Q: Assume that a farmer has $223,500 in Total Assets and $90,500 in Owner Equity, faces a 15% income…
A: Rate of return depicts the percentage of the profitability of a company's assets required in order…
Q: Suppose that JB Cos. has a capital structure of 75 percent equity, 25 percent debt, and that its…
A: WACC is weighted Average cost of Capital shows the average cost of Capital obtained from the all…
Q: Suppose a firm's tax rate is 25 %. What effect would a $ 11.4 million capital expense have on this…
A: Depreciation impacts net income
Q: Suppose you sell a fixed asset for $110,000 when its book value is $130,000. If your company's…
A: Loss on sale = Book value - Sale value of asset =(130000-110000) =$20000
Q: b) If the selling price increases by 10% calculate the increase in the net profit at the whole…
A: The Question is related to Marginal costing and it will be solved accordingly.
Q: A firm incurs $70,000 in interest expenses each year. If the tax rate of the firm is 30%, what is…
A: The below expression can be used to calculate after-tax interest expense:
Q: Western Lumber Company expects to have free cash flow in the coming year of $4.25m and is expected…
A: Here, Expected Free cashflow=$4,250,000 Growth rate = 4% Cost of equity = 10% Pre-tax Cost of debt =…
Q: The cost of capital is 15%, the before-tax cost of debt is 9%, and the mar-ginal income tax rate is…
A: The cost of capital is the cost of raising funds a firm has to bear. It is the weighted average cost…
Q: Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s…
A: ANSWER After tax cash flow from sale of assets: After tax cash flow (ATCF) from sale of assets…
Q: A company has annual after-tax operating cash flows of P2,000,000 per year which are expected to…
A: After-tax operating cash flows = P 2,000,000 After tax WACC = 8%
Q: Suppose a firm has $10 million in debt that it expects to hold in perpetuity. It the interest rate…
A: The following information has bee provided in the question: Amount of debt= $10 million Interest…
Q: Suppose a business takes out a $5, 000, five-year loan at 9 percent. The loan agreement calls for…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s…
A: After-tax cash flow of this sale is the net amount received from the sale of fixed asset. Net amount…
Q: You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of…
A: Solution:- i)Computation of pro forma earnings for year 3 as follows:- Note:- Straight line method…
Q: Use the following information from Salalah Mills Company to calculate Compounded Annual Growth Rate…
A: CAGR refers to the compounded annual growth of rate on return . It is used to measure and compare…
Q: The average profit after tax for ABC company is 120,000$; it has initiated an investment of…
A: Average Rate Return(ARR) shows average profit earned on investment on annual basis. ARR is expressed…
Q: Calculate a firm's free cash flow if it has net operating profit after taxes of $60,000,…
A: The total cash that a company has to pay off to its liabilities and dividend to its shareholders is…
Q: interest and taxes should be 10% of total sales, and the federal-plus-state tax rate is 25%. a. What…
A: Information Provided: Expected sales = $3 million Fixed assets = $2 million Debt-to assets = 50%…
Q: Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between…
A: payment to capital is called rent to land
Q: Jones Soda estimates that its required return on equity is 11.0 percent and the yield to maturity on…
A: after tax cost of debt = before tax cost of debt * (1-taxrate)
Q: Suppose you sell a fixed asset for $115,000 when it's book value is $135,000. If your company's…
A: The after tax cash flow is calculated as cash flow from sale proceeds minus tax on gain on sale
Q: Assume the hiking shoes division of the all about shoes corporation had the following results last…
A: Residual Income: Residual income is the net operating income that is earned by the investment…
Q: Bulldogs Inc., which is funded by debt and ordinary equity, has a debt to equity ratio of 100%. The…
A: The cost of debt is tax-deductible and hence its effective cost is different.
Q: You are given the following information on Kaleb's Heavy Equipment: Profit margin Capital intensity…
A: The formula for the calculation of sustainable growth rate is Sustainable growth rate=ROE x b1-ROE…
Q: Suppose an investor gave you $150,000 to start your business. You gave this investor 50 percent of…
A: ROI The return on investment (ROI) is calculated as a percentage of profit generated by a certain…
Assume that a farmer has $223,500 in Total Assets and $90,500 in Owner Equity, faces a 15% income tax rate, and a 20% consumption rate. Further, assume that the interest rate is 12.5%. What is the rate-of-
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Assume that a farmer has $157,500 in total assets and 102,600 in total debt faces 20% income tax rate and 40% consumption rate. Further assume that the rate of return on assets is 19.5% what is the interest rate if the firm growth rate is 11.5%?What is the rate of return on an investment that costs $5,000, earned a $600 dividend during the year, and is sold after 1 year for $4,400?A firm has total interest charges of $10,000 per year, sates of $1 million, a tax rate of 40 percent, and a net profit margin of 6 percent. What is the firm's times-interest-earned ratio?
- Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? (Enter your answer as a whole number.)What's the rate of return you would earn if you paid $2,880 for a perpetuity that pays $65 per year? X-1 Corp's total assets at the end of last year were $425,000 and its EBIT was $52,500. What was its basic earning power (BEP) ratio?Suppose you sell a fixed asset for $126,000 when it's book value is $157,000. If your company's marginal tax rate is 35%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
- Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000,and its tax rate is 40 percent. Vapor Lock’s beta is 1.5.a. What is Vapor Lock’s DFL?b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentageincrease in net income?c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resultingnet income?Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2?Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $1.6 million. Its depreciation and capital expenditures will both be $301,000, and it expects its capital expenditures to always equal its depreciation. Its working capital will increase by $47,000 over the next year. Its tax rate is 30%. If its WACC is 8% and its FCFs are expected to increase at 5% per year in perpetuity, what is its enterprise value?
- A lot purchased for $4,500 is held for five years and sold for $13,500. The average annual property tax is $45 and may be accounted for at an interest rate of 12%. The income tax rate on the long term capital gain is 15% of the gain. What is the rate of return on the investment if the allowance for inflation is treated at an average annual rate of 7%?An A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million, interest costs of $2 million, and a 30 percent average tax rate. a) Compute its DOL, DFL, and DCL. b) What will be the expected level of EBIT and net income if next year's sales rise 10 percent? c) What will be the expected level of EBIT and net income if next year's sales fall 20 percent?An investor owns a property that produces an NOI of $110,000 and has an annual debt service of $70,000 and the forecast of cost recovery and interest deductions are $38,427 and $58,593 respectively. The investor’s marginal tax rate is 35 percent. The investor’s projected cash flow after taxes is: A. $30,000 B. $35,457 C. $43,256 D. $25,821