Crane Company has $1,020,000 in assets and $1,020,000 in stockholders’ equity, with 39,000 shares outstanding the...
Crane Company has $1,020,000 in assets and $1,020,000 in stockholders’ equity, with 39,000 shares outstanding the entire year. It has a return on assets of 10%. During 2021, it had net income of $102,000. On January 1, 2022, it issued $370,000 in debt at 6% and immediately repurchased 19,500 shares for $370,000. Management expected that, had it not issued the debt, it would have had net income of $102,000 in 2022. Assume the company pays dividends on common stock equal to its net income each year. Also, assume the accrued interest on the debt was paid at December 31, 2022 and the company has no other debt outstanding at year-end.
Compute the companys return on common stockholders equity in 2022. What is the return on the stockholders equity in 2022?
Compute the companys debts to assets ratio. What is the debt to assets ration for 2022?
Homework Answers
| Capital Structure on January 1,2022 | |||||
| Debt at 6% | $370,000 | ||||
| Stockholders Equity | $650,000 | (1020000-370000) | |||
| Shares Outstanding =39000-19500 | 19500 | ||||
| Total Assets | $1020000 | ||||
| INCOME IN 2022 | |||||
| Earning Before interest | $102,000 | ||||
| Interest expense =370000*6% | $22,200 | ||||
| Net Income | $79,800 | ||||
| Note: Information about taxes is not available | |||||
| Assumed taxes=NIL | |||||
| Return on stockholders equity in2022 | 0.122769 | (79800/650000) | |||
| Return on stockholders equity in2022 | 12.28% | ||||
| Debt to Asset Ratio | 0.362745 | (370000/1020000) | |||
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Exercise 11-20 a-c Crane Company has $1,140,000 in assets and $1,140,000 in stockholders’ equity, with 36,600...
Exercise 11-20 a-c
Crane Company has $1,140,000 in assets and $1,140,000 in
stockholders’ equity, with 36,600 shares outstanding the entire
year. It has a return on assets of 15%. During 2021, it had net
income of $171,000. On January 1, 2022, it issued $397,000 in debt
at 6% and immediately repurchased 18,300 shares for $397,000.
Management expected that, had it not issued the debt, it would have
had net income of $171,000 in 2022.
Determine the company’s net income and...
Ivanhoe Company has $1,200,000 in assets and $1,200,000 in stockholders equity, with 42,200 shares outstanding the...
Ivanhoe Company has $1,200,000 in assets and $1,200,000 in
stockholders equity, with 42,200 shares outstanding the entire
year. It has a return on assets of 10%. During 2016, I had net
income of $120,000. On January 1, 2017, it issued $386,000 in debt
at 6% and immediately re-purchased 21,100 shares for $386,000.
Management expected that, had it not issued the debt, it would have
had net income of $120,000 in 2017.
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Cabo Company has $1,000,000 in assets and $1,000,000 in stockholders’ equity, with 40,000 shares outstanding the...
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Crane Company has $1,140,000 in assets and $1,140,000 in
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at 6% and immediately repurchased 21,100 shares for $386,000.
Management expected that, had it not issued the debt, it would have
had net income of $120,000 in 2022. Assume the company pays
dividends on common stock equal...
Exercise 11-20 a-c
Crane Company has $1,140,000 in assets and $1,140,000 in
stockholders’ equity, with 36,600 shares outstanding the entire
year. It has a return on assets of 15%. During 2021, it had net
income of $171,000. On January 1, 2022, it issued $397,000 in debt
at 6% and immediately repurchased 18,300 shares for $397,000.
Management expected that, had it not issued the debt, it would have
had net income of $171,000 in 2022.
Determine the company’s net income and...
Ivanhoe Company has $1,200,000 in assets and $1,200,000 in
stockholders equity, with 42,200 shares outstanding the entire
year. It has a return on assets of 10%. During 2016, I had net
income of $120,000. On January 1, 2017, it issued $386,000 in debt
at 6% and immediately re-purchased 21,100 shares for $386,000.
Management expected that, had it not issued the debt, it would have
had net income of $120,000 in 2017.
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