Amazing Brentwood inc bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value.In the year of 2018, The firm just paid 5420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The taxrate is 34 percent. Sales are $6,250 and depreciation is $710.6. How will issuing more shares affect the capital structure of the company?7.What does the firm need to do to raise its ROE?8.Calculate the profit margin ratio of the company and comment on the profitability performance of the company.9.What type of financial decision is the company making with the expansion?10. The disagreement among the shareholders, BOD and the managers is popularly points to what in finance?

A financial ratio is the ratio of various numbers in the balance sheet or balance sheet and income…

Answered: What does the firm need to do to raise…

What does the firm need to do to raise its ROE? Calculate the profit margin ratio of the company and comment on the profitability performance of the o

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 11P

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Amazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. 1. Given this information, determine the value of the terminal loss or recapture at the end of year 5. 2. What are the earnings before interest and taxes in the year 2018? 3. What is the after-tax net profit for the year 2018? The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has…
Amazing Brentwood Inc bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year of 2018, The firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. 1. Given this information, determine the value of the terminal loss or recapture at the end of the year. 2. What are the earnings before interest and taxes in the year 2018? 3. What is the after-tax net profit for the year 2018?
Amazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has been determined to be 10% which is likely to go up in the next year. The company is concerned about the profitability ratios of the company and it is seeking your advice to improve them. The sales of the recent quarter of…
Amazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has been determined to be 10% which is likely to go up in the next year. The company is concerned about the profitability ratios of the company and it is seeking your advice to improve them. The sales of the recent quarter of…
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