The following data applies to a firm: Interest charges=P50,000.00; Sales = P300,000.00; Tax Rate=P25%; Net Profit Margin=3%. What is the firm's time interest covered ratio? a. 0.24 b. 0.54 c. 1.04 d. 1.24 e. 1.44
Q: O Perseverance Corporation is deciding whether to pursue a restricted or relaxed current asset…
A: Return on equity = Net income/equity Roe under restricted policy is 6.5℅ and under relaxed policy…
Q: Based on the key indicators tabulated in the table below and the readings and resources provided for…
A: PE Ratio = MPS/EPS Debt-to-Equity Ratio = long term debt /equity
Q: A. ABC Corp., expects a net income of Php. 250,000. The company has 10% of 5,000,000 Debentures. The…
A: Hi student Since there are multiple questions, we will answer only first question. If you want…
Q: Adams Inc. has the following data: rRF = 4.00%; RPM = 7.00%; and b = 1.20. What is the firm's cost…
A: Cost of common equity Using CAPM Formula Risk free rate + ( Market rate…
Q: Currently, Blue Co. has a debt ratio of 35%. The beta unlevered of Blue Co. is the 1.2. Applicable…
A: Beta is the measure of the systematic risk associated with the firm. Unlevered beta is calculated…
Q: Based on this information, which of the following is true? a. The value of Firm L is the same as…
A: Firm U Firm L EBIT 10000000 10000000 Less: Interest 0 6000 EBT 10000000 9994000 Less: Tax…
Q: The tax rate applicable to Blue Co. is 20%. The firm pays 5% interest on the P350,000 outstanding…
A: Outstanding loan = P 350000 Interest rate = 5% Tax rate = 20% Preferred dividends = P 16500
Q: Suppose that B2B, Inc. has a capital structure of 35 percent equity, 16 percent preferred stock, and…
A: Calculation of WACC:The WACC is 9.59%.Excel Spreadsheet:
Q: Assuming that there is an unlevered firm and a levered firm. The basic information is given by the…
A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
Q: Instructions: Assume the following data for two firms (U = unlevered firm) and (L = levered firm).…
A: Leverage means borrowing money for increasing investment. Leverage is used to enhance the overall…
Q: Calculate the following values:a) Value of Unlevered Firm Assuming that there is an unlevered firm…
A: The formula to calculate value of unlevered firm is given below:
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: A firm has EBIT of $7.5 million, a 33% tax rate, a weighted average cost of capital of 8.95% and…
A: EBIT = $7.5 MillionTax Rate = 33%Weighted Average Cost of Capital (WACC) = 8.95%Total Capital = $55…
Q: Choose the correct letter of answer and provide a solution A firm has profit before tax of P63…
A: Interest coverage ratio is a financial ratio which determines how well a company can pay the…
Q: Calculate the value of the levered firm based on: Assuming that there is an unlevered firm and a…
A: The debt for levered firm is calculated below:
Q: An unlevered firm, U, operates in a perfect market and has a net operating income of GHC250,000.00…
A: Leverage: Leverage means using debt in its capital structure. Leverage indicates the amount of…
Q: Compute the degree of financial leverage for a firm with EBIT of P6,000,000, fixed costs of…
A: Option A is the correct answer i.e 1.2
Q: Table1: Information of the firms Unlevered firm Levered firm EBIT :10000 :10000 Interest…
A: Part A) Fill in the blanks : Putting values above :
Q: The company CapStar Pic has an expected EBIT of E145,000 in perpetuity. and its untevered cost of…
A: Given: Expected EBIT = 145000 Unlevered cost of capital = 10% Outstanding debt = 100000 Interest…
Q: Calculate to the following for Pharmos considering its tax rate of 25 percent. i. Total Market Value…
A: i. Total Market Value for the Firm: Excel formula:
Q: Referring to table below, calculate the market value of firm L (without a corporate income tax) if…
A: The Modigliani - Miller Proposition: Modigliani-Miller proposition 1 states that a firm market value…
Q: EV EBIT,(1-Tc) Ataboy Ltd. is trading at a forward ratio of 12.5, an after- tax operating margin of…
A: After tax operating profit margin = EBIT(1 - T) / Sales = 0.1 EV/EBIT(1 - T) = 12.5 ROC = EBIT(1 -…
Q: If the value of unlevered company (Vu) is OMR 180,000 and unlevered cost of equity (Ke) is 10%, then…
A: EBIT means earning before interest and taxes. Unlevered firm means a company who do not have any deb…
Q: A firm is making a payment of $1000 to its investors. The firm is in the 35% marginal tax bracket.…
A: Firm have to make payments to investors as a return. Firm pays to investors after deduction if tax.
Q: QUESTION 4 A firm with a 40% marginal tax rate has a capital structure of $60,000,000 in debt and…
A: WACC = (Weight of debt * marginal after tax cost of debt) + (Weight of equity * Cost of equity)
Q: A firm has EBIT of R375,000, interest expense of R75,000, preferred dividends of R6,000 and a tax…
A: Leverage is an investment technique that involves the use of borrowed money—specifically, the use of…
Q: 1.A Assume that a Peruvian company, DMB LLC, just reported its earnings this year. The reported…
A: Given: Revenue = $10 million Cost = $9 million Discount rate = 8%
Q: The financial breakeven point of Soil Inc. is P90,000, while the tax rate applicable to the company…
A: At financial breakeven point, EBIT level is such that net income is zero. EBIT = P 90000 Tax rate =…
Q: The EBIT of the unlevered company is OMR 60,000; cost of equity of unlevered company is 8% and the…
A: Modigliani-Miller model is the theory used to find the relationship between the value of a firm and…
Q: Assume that personal and corporate taxes are given by: TC = (corporate tax rate) = 30 percent; TPS=…
A: Effective Tax Advantage: In presence of personal taxes on either interest or equity income, the…
Q: A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm…
A: WACC = (Ke*Wk) + (Kd*(1-t)*Wd) Where Ke = Cost of equity Kd = Cost of debt Wk = weight of equity…
Q: What is the EPS in the following case? Debt : Equity ratio = 3:1 Total Capital employed =…
A: Earnings per share is calculated by dividing the earnings available for equity shareholders with the…
Q: The tax rate applicable to Blue Co. is 20%. The firm pays 5% interest on the P350,000 outstanding…
A:
Q: 4. Please consider the following company items: Other items 25% 0.60 0.30 BBB Tax rate Unlevered…
A: Weighted Average Cost of Capital of the firm, which represent their cost of capital for all the…
Q: a) value of unlevered firm; b) value of the levered firm;
A: Modigliani - Miller approach (MM) theory introduced a theory based on the capital structure. This…
Q: The ABCCompany has a cost of equity of 21.2 percent, a pre-tax cost of debt of 5.2percent, and a tax…
A: WACC: It is the company’s total cost of capital which is computed by giving weights to the sources…
Q: Consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses…
A:
Q: hoose the correct letter of answer: The following data applies to a firm: Interest Charges P10…
A: Ratio analysis means where different ratio of various years of years companies has been compared and…
Q: Bombay Company's book and market value balance sheets are as follows: (NWC = net working capital;…
A: The reduction in the company's debt is calculated by multiplying the equity issued by the marginal…
Q: Compute the degree of financial leverage for a firm with EBIT of P6,000,000, fixed costs of…
A: Degree-of-Financial Leverage or DFL shows effect of variation in earnings of an entity or EBIT due…
Q: As an Analyst you were tasked to compute for the Weighted Average Cost of Capital of various…
A: Weighted average cost of capital (WACC) is the average cost of capital of the firm from all sources…
Q: Assuming that there is an unlevered firm and a levered firm. The basic information is given by the…
A: The question is related to the leveraged and unleveraged firm Leveraged firm means a firnm having…
Q: From the following information, calculate the value of Levered Firm according to MM Approach, where…
A: Where: tc = Tax rate D = Debt VU = Value of the unlevered firm VL = Value of the levered firm
Choose the correct letter of answer and provide solution
The following data applies to a firm: Interest charges=P50,000.00; Sales = P300,000.00; Tax Rate=P25%; Net Profit Margin=3%. What is the firm's time interest covered ratio?
a. 0.24
b. 0.54
c. 1.04
d. 1.24
e. 1.44
Step by step
Solved in 2 steps
- Suppose the firm makes the change but its competitors react by making similar changes to their own credit terms, with the net result being that gross sales remain at the current 1,000,000 level. What would be the impact on the firms after-tax profitability?Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.) Is there a cost of the trade credit the firm uses? If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit? What would be the firm’s cost of not taking discounts if it could stretch its payments to 40 days?Whirlpool manufactures and sells home appliances under various brand names. IBM develops and manufactures computer hardware and offers related technology services. Target operates a chain of general merchandise discount retail stores. The data in the following table apply to these companies (dollar amounts in millions). For each firm, assume that the market value of the debt equals its book value. REQUIRED a. Assume that the intermediate-term yields on U.S. government Treasury securities are 3.5%. Assume that the market risk premium is 5.0%. Compute the cost of equity capital for each of the three companies. b. Compute the weighted-average cost of capital for each of the three companies. c. Compute the unlevered market (asset) beta for each of the three companies. d. Assume that each company is a candidate for a potential leveraged buyout. The buyers intend to implement a capital structure that has 75% debt (with a pretax borrowing cost of 8.0%) and 25% common equity. Project the weighted-average cost of capital for each company based on the new capital structure. To what extent do these revised weighted-average costs of capital differ from those computed in Requirement b?
- Choose the correct letter of answer: The following data applies to a firm: Interest Charges P10 Million, Sales/CGS P80 Million, Tax Rate 50% and Net profit margin 10%. What is the firm's interest covered ration? a. 1.6b. 2.6c. 3.6d. 4.6e. 5.6Choose the correct letter of answer and provide a solution A firm has profit before tax of P63 million. If the company's times interest covered ratio is 8 times, what is the total interest charge? a. P3 Millionb. P6 Millionc. P9 Milliond. P12 Millione. P15 MillionChoose the correct letter of answer: In the current year, Company A had P15 Million in sales, while total fixed costs were held to P6 Million. The firm's total assets at year-end were P20 Million and the debt/equity ratio was calculated at 0.60. If the firm's EBIT is P3 Million, the interest on all debt is 9%, and the tax rate is 40%, what is the firm's return on equity? a. 11.16%b. 14.4%c. 18.6%d. 24.0%e. 28.5%
- You are analysing NBM firm and obtained the following information: FCFF reported as R198 million, interest expense is R15 million. If the tax rate is 35% and the net debt of the firm increased by R20 million, what is the approximate market value of the firm if the FCFE grows at 3% and the cost of equity is 14%? R1,950 billion R2,497 billion R2,585 billion R3,098 billion R 1,893 billionchoose the letter of the correct answer Yana Corp. has a profit before tax of P90 million. If the company's times interest covered ratio is 4, what is the total interest charge? a. P15Mb. P30Mc. P40Md. P50Me. P60MGive typing answer with explanation and conclusion A company has an expected EBIT of $18,000 in perpetuity, a tax rate of 35%, and a debt-to- equity ratio of 0.75. The interest rate on the debt is 9.5%. The firm’s WACC is 9%. a) If the company has not debt, what would be the unlevered cost of capital and firm value? b) Suppose now the company has $55,714.29 in outstanding debt. Using your answer to part a) and M&M Proposition I with taxes, what is the value of this levered firm?
- IXYZ Ltd., experts a net income of $150,000. The company has 10% 500,000 debentures. The equity capitalization rate of the company is 10%.g(a) Calculate the value of the firm and overall capitalization rate accordint the net income approach (ignore income tax).(b) If the debenture debt is increased to $750,000 and interest of debt inchange to 9%. What is the value of the firm and overall capitalizatiorate?Blue Co. has a total liabilities of P400,000 on which 40% is a long-term liability. The non-current asset of the firm is half of the total asset and it is determined that its current ratio is 3:1. If the firm has a net profit of P144,000, what will be the return on asset? (type the answer in percentage with “%”)Calculate the following values:a) Value of Unlevered Firm Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table. Table 1: Information of the firms Unlevered firm Levered firm EBIT 10,000 10,000 Interest 0 3,200 Taxable income 10,000 6,800 Tax (tax rate: 34%) 3,400 2,312 Net income 6,600 4,488 CFFA 0 -3,200 Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5
