Business

FinanceQ&A LibraryRector Corporation, which is currently operating at full capacity, has sales of $29,000, current assets of $1,600, current liabilities of $1,200, net fixed assets of $27,500, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 3.5 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?Start your trial now! First week only $4.99!*arrow_forward*

Question

Rector Corporation, which is currently operating at full capacity, has sales of $29,000, current assets of $1,600, current liabilities of $1,200, net fixed assets of $27,500, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 3.5 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?

Tagged in

Business

Finance

Find answers to questions asked by students like you.

Q: Consider the following two mutually exclusive projects: Year Cash Flow Cash Flow B 0 -$3...

A: NPV (Net Present Value)NPV is the method of finding the worth of an investment or project by deducti...

Q: Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double ...

A: The formula to determine the annual rate of return:Where,FV denotes the future valuePV denotes the p...

Q: Until August 1971, industrialized countries around the world maintained a fixed exchange rate of the...

A: Answer 1:The correct answer is “Forward exchange rate”.Justification: A forward exchange rate is wh...

Q: Your firm is offered credit terms of 1/10, net 35. What is the effective annual interest rate on thi...

A: Calculating the value of effective interest rate on the credit terms. We have,Effective interest rat...

Q: The table below shows a book balance sheet for the Wishing Well Motel chain. The company's long-term...

A: Calculation of Total Market Value:

Q: Suppose a family has a gross annual income of $43,200. a. What is the maximum amount the family sh...

A: Most financial advisors recommend that one limit his mortagage payment to 28% of the monthly income ...

Q: ABC Enterprises' noncallable bonds currently sell for $1,048.50. They have a 5-year maturity, an ann...

A: The yield to maturity of a bond can be calculated using the RATE function in excel. Inputs are:Perio...

Q: You are considering an investment in a clothes distributer. The company needs $105,000 today and exp...

A: Initial Cash outflow = C0 = $ 105,000; Cash inflow next year = C1 = $ 120,000If R is the IRR then, N...

Q: Let C be the price of a call option to purchase a security whose present price is S. Explain why C ...

A: Options are derivative contracts and the amount that we pay to buy an option is called premium.

Q: The company stock increases dividend by 5% each year and the expecteddividend in 5 years is $5. Anal...

A: Suppose the recent dividend paid=$xDividend in year 1=x*(1+growth rate)Dividend in year 2=x*(1+growt...

Q: Case Study #3: Chapter 6 Business Analysis A business can be valued by capitalizing its earnings st...

A: A business can be valued by capitalizing its earnings stream. In fact, the valuation of any asset or...

Q: 2. Present value Aa Aa Finding a present value is the reverse of finding a future value. Which of th...

A: Present Value is a value of today for all the cashflows generated in the future period of time. The ...

Q: Divided Walls Construction (DWC) has determined that the yield to maturity (YTM) on new bonds is 5 p...

A: a)Calculation of Weighted Average Cost of Capital if new stock is not issued:

Q: If Wild Widgets, Inc., were an all-equity company, it would have a beta of .90. The company has a ta...

A: Cost of Debt:Cost of Debt is the amount or rate which a company bears on the borrowings. It also sta...

Q: Assume that the agreed-upon price is $90,000. What is the expected profiton the contract assuming th...

A: In the earlier part, the marginal cost for hospital 4 was calculated as $ 71,468 Marginal cost / pat...

Q: Bill Clinton reportedly was paid $10 million to write his book My Life. Suppose the book took three ...

A: All financials below are in $ mn.Part (a)Speaking fees, F = 8 per year for N = 3 yearscost of capita...

Q: Assume a security follows a geometric Brownian motion with volatility parameter sigma=0.2. Assume t...

A: You have stated that "I got an answer of $3.00 for the cost of the call option" and then you have st...

Q: You are evaluating two different silicon wafer milling machines. The Techron I costs $300,000, has a...

A: Calculation of EAC of Techron I and Techron II:The EAC is calculated using a excel spreadsheet. The ...

Q: A store will give you a 4.00% discount on the cost of your purchase if you pay cash today. Otherwise...

A: Let's assume the cost of purchase is C. On immediate payment,Discount = 4%Hence, the discounted cost...

Q: I now have $16,000 in the bank earning interest of 1.00% per month. I need $26,000 to make a down pa...

A: Calculation of Duration of the Investment:The Duration of the Investment can be calculated using a e...

Q: Discuss some factors that health services managers must consider when choosing between debt and equi...

A: Before we compare and constrast debt & equity as source of finance, let's understand a bit about...

Q: Consider a project lasting one year only. The initial outlay is $1,000 and the expected inflow is $1...

A: Before we get into solving this problem, let's recall two formulae and concepts:For a project lastin...

Q: What is opportunity cost and how does it affect the decision-making process for business decisions?

A: Discuss the opportunity cost and the way how it affects the decision making process for business dec...

Q: Could you please give me a brief overview of what "cash flow for ROR analysis" is? Thanks.

A: ROR analysis is a short form for Rate of Return Analysis.Under ROR analysis, we need to find that Ra...

Q: Is there an easily identifiable debt-equity ratio that will maximize the value of a firm? Why or why...

A: No, there is no such ratios.

Q: Suppose that the value of an investment in the stock market has increased at an average compound rat...

A: Calculation of Worth of Investment Today:With the current year being 2016, there are totally 112 yea...

Q: Case Study #2: Chapter 5 Business Analysis - Harry, a friend of yours, is taking a course in economi...

A: If we have money today, we can use it in two ways:We can use the money to buy something that we want...

Q: Participation #6: Why is it desirable to construct capital budgeting rules so that higher-risk pro...

A: A risk is a probability of unfavorable outcome. All investments are subjected to risks. So, a high ...

Q: How long will it take for money to double if invested at 6% compounded quarterly?

A: Compounded Interest: It is the method of calculating interest at the initial amount of pri...

Q: The ROA of your firm is 5%. The firm also has a debt-asset ratio of 70%. If your firm reinvests 100%...

A: Calculating the value of internal growth rate. We have,Internal Growth Rate = ROA X RR / (1 – ROA X ...

Q: Suppose 1-year Treasury bonds yield 3.10% while 2-year T-bonds yield 4.80%. Assuming the pure expec...

A: 1-year Treasury bonds yield, S01 = 3.10%2-year T-bonds yield, S02 = 4.80%. The yield on a 1-year T...

Q: Ferradini company's stock has a required rate of return of 12.50% and it sells for $18.00 per share....

A: Formula to calculate the last dividend:

Q: Buoyant Cruises plans to issue preferred stock with a $120 par value and a 5 percent dividend. Even ...

A: Calculation of cost of issuing preferred stock:

Q: Todd Foley is applying for a $290,000 mortgage. He can get a $2,030 monthly payment for principal an...

A: Calculation of number of months:Excel spreadsheet for calculation of number of months

Q: a. Use the appropriate formula to determine the periodic deposit. b. How much of the financial goal ...

A: Given: Rate = 6.75% compounded monthlyTime = 45 yearsFinancial goal = $1,000,000Using formula for fu...

Q: Please can you show me step by step to solve for OFC? Thank

A: OCF is Operating Cashflow which is the money a firm generates through its regular operations.

Q: Countess Corp. is expected to pay an annual dividend of $3.97 on its common stock in one year. The c...

A: Calculating the cost of equity using the formula of dividend discounting model. We have,Current pric...

Q: Suppose you pay 10 to buy a European (K=100, t=2) call option on a given security. Assuming a conti...

A: Let S be the proce of the security and K be the stirke price of the call option and C is the cost to...

Q: Stock in CDB Industries has a beta of 1.13. The market risk premium is 7.3 percent, and T-bills are ...

A: Expected dividend is computed and then dividend yield is computed.Cost of equity is eqqual to Divide...

Q: Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs a...

A: Your answers to part (a), (b) and (c) are correct. Hence, I am not solving them again. Further you h...

Q: Required: Use an Excel spreadsheet to calculate the net present value from a Parent company perspect...

A: Calculating the value of total cost of plant and depreciation expenses using straight-line method in...

Q: Hero Manufacturing has 8.5 million shares of common stock outstanding. The current share price is $7...

A: As a first step we need to calculate the weigthed average pre tax cost of debt based on the characte...

Q: Use the compound interest formula A = P(1 + i)n to find the indicated values A = $6,000; i = 0.03; n...

A: Compounded Interest: It is the method for computing interest at the initial amount of prin...

Q: The following problem refers to the stock table for ABC Inc. (a tire company) given below. Use the...

A: A.The amount of shares traded yesterday is nothing but the total volume of shares which is 591,500 s...

Q: Please show how to get the missing values step by step

A: Part (1)Please see the white board.

Q: NoGrowth Corporation currently pays a dividend of $2.08 per year, and it will continue to pay this ...

A: Cost of Equity: It is the cost of the company while raising finance by issuing equity. It is earning...

Q: What is the future value in 12 years of $1,000 payments received at the beginning of each year for t...

A: As a first step, let's gather all the information that question has to offer.Annuity investment = A ...

Q: Assume Technical Investors is thinking about three different size offerings for issuance of addition...

A: The percentage underwriting spread for each size offer is calculated as follows:Percentage underwrit...

Q: Use the following information: . Debt: $79,000,000 book value outstanding. The debt is trading at 94...

A: Calculation of Total Market Value:

Q: Tommy’s Automotive Group currently has 6,400,000 shares of stock outstanding and will report earning...

A: Calculate the value of immediate dilution potential for this new stock issue. We have,Earnings per s...