Theoretically, how much debt should a company carry on its balance sheet? A. An enterprise should...
Homework Answers
company carry cost of debt or other fixed interest rate sources to boost the income of the equity share holders. This is called the trading on equity or taking the advantage of finacial leverage. Where the income earned on the basis of debt helps to increase the per share income of equity. so the correct answer is C
C. An enterprise should carry enough debt in its capital structure to boost its return on investment in projects earning more than the cost of the debt.
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Theoretically, how much debt should a company carry on its
balance sheet?
A.
An enterprise should...
You are given the following data on the balance sheet of a company: Assets 455,000 Debt...
You are given the following data on the balance sheet of a company: Assets 455,000 Debt 155,000 Equity 300,000 Total assets 455,000 Total liabilities 455,000 The cost of debt capital is 4% and the cost of equity is 13%. The risk free rate is 3% and the expected return on the market index is 7%. What is the weighted average cost of capital for the company? What is the beta of the assets of the company? Suppose the firm changes...
Following is the balance sheet of Jordan Company for Year 3: JORDAN COMPANY Balance sheet Assets...
Following is the balance sheet of Jordan Company for Year 3: JORDAN COMPANY Balance sheet Assets Cash Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 15,100 7,980 12,740 10,750 170,500 (12.900) $ 204,170 $ 8,540 3,080 4,600 21,480 114,400 52,670 $204,170 The average number of common stock shares outstanding during Year 3 was...
Q. Rao Corporation has the following balance sheet. How much net operating working capital does the...
Q. Rao Corporation has the following balance sheet. How much net operating working capital does the firm have? Cash $ 10 Accounts payable $ 20 Short-term investments 30 Accruals 20 Accounts receivable 50 Notes payable 50 Inventory 40 Current liabilities $ 90 Current assets $130 Long-term debt 60 Net fixed assets 100 Common equity 30 Retained earnings 50 Total assets $230 Total liab. & equity $230
VERSION: A have? South Eastern Inc. has the following balance sheet. How much net operating working...
VERSION: A have? South Eastern Inc. has the following balance sheet. How much net operating working capital does the firm nwc-CA-Cl Assets Liabilities and Owner's Equity Cash $ 100 Accounts payable $ 200 Accounts receivable 650 Accruals 350 Inventory 550 Notes payable 350 >$1,300 Current assets Current liabilities > $ 900 600 1,000 Long-term debt Net fixed assets Common equity 300 Retained earnings $2,300 Total liabilities & equity $2.300 Total assets 500
A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total...
A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total common equity. The tax rate s 40%. Cost of debt is equal to 6%, cost of preferred stock is equal to 7.5%, and cost of equity is equal to 12%. If there target capital structure is 30% debt, 5% preferred stock, and 65% common stock, what is the WACC it should use to evaluate future projects?
Smallville Bank has the following balance sheet, rates earned on its assets, and rates paid on...
Smallville Bank has the following balance sheet, rates earned on its assets, and rates paid on its liabilities. Rate Earned () Rate Paid (s) Balance Sheet (in thousands) Assets Cash and due from banks $ 6,000 Investment securities 22,000 Repurchase agreements 12,000 Loans less allowance for losses 80,000 Fixed assets 10,000 Other earning assets 4,000 Total assets $134,000 Liabilities and Equity Demand deposits $ 9,000 NOW accounts 69,000 Retail CDs 18,000 Subordinated debentures 14,000 Total liabilities 110,000 Common stock 10,000...
Following is the balance sheet of Finch Company for 2018: FINCH COMPANY Balance sheet Assets Cash...
Following is the balance sheet of Finch Company for 2018: FINCH COMPANY Balance sheet Assets Cash Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 14,550 7,900 12,800 11,200 167,500 (12,900) $ 201,050 8.690 3,000 4,300 21.360 113,700 50,000 $ 201,050 The average number of common stock shares outstanding during 2018 was 860 shares....
Following is the balance sheet of Solomon Company for 2018: SOLOMON COMPANY Balance sheet Assets Cash...
Following is the balance sheet of Solomon Company for 2018: SOLOMON COMPANY Balance sheet Assets Cash Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 14,750 7,620 13,160 10,750 165,500 (13,000) $198, 780 $ 8,390 3,240 4,200 21,300 113,300 48,350 $198,780 The average number of common stock shares outstanding during 2018 was 880 shares....
Following is the balance sheet of Finch Company for 2018: FINCH COMPANY Balance sheet Assets Cash...
Following is the balance sheet of Finch Company for 2018: FINCH COMPANY Balance sheet Assets Cash $ 15,100 8,020 13,160 11,450 173,000 (12,600) $208,130 Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity 8,930 3, 440 5,000 21,960 113,600 55,200 $208,130 The average number of common stock shares outstanding during 2018 was 860 shares. Net...
First, restructure the balance sheet into a managerial balance sheet by re-arranging it to include the...
First, restructure the balance sheet into a managerial balance sheet by re-arranging it to include the working capital requirement. Then answer the questions that follow. Treat pre-paid expenses the same as you would accounts receive-able. As a check on your work. You should arrive at a capital employed (left hand side of the managerial balance sheet) of $1,090). The balance sheet of a firm is (in millions of $): Cash 75 Short term debt 50 A/R 65 A/P 35 Pre-paid...
Following is the balance sheet of Jordan Company for Year 3: JORDAN COMPANY Balance sheet Assets Cash Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 15,100 7,980 12,740 10,750 170,500 (12.900) $ 204,170 $ 8,540 3,080 4,600 21,480 114,400 52,670 $204,170 The average number of common stock shares outstanding during Year 3 was...
VERSION: A have? South Eastern Inc. has the following balance sheet. How much net operating working capital does the firm nwc-CA-Cl Assets Liabilities and Owner's Equity Cash $ 100 Accounts payable $ 200 Accounts receivable 650 Accruals 350 Inventory 550 Notes payable 350 >$1,300 Current assets Current liabilities > $ 900 600 1,000 Long-term debt Net fixed assets Common equity 300 Retained earnings $2,300 Total liabilities & equity $2.300 Total assets 500
Smallville Bank has the following balance sheet, rates earned on its assets, and rates paid on its liabilities. Rate Earned () Rate Paid (s) Balance Sheet (in thousands) Assets Cash and due from banks $ 6,000 Investment securities 22,000 Repurchase agreements 12,000 Loans less allowance for losses 80,000 Fixed assets 10,000 Other earning assets 4,000 Total assets $134,000 Liabilities and Equity Demand deposits $ 9,000 NOW accounts 69,000 Retail CDs 18,000 Subordinated debentures 14,000 Total liabilities 110,000 Common stock 10,000...
Following is the balance sheet of Finch Company for 2018: FINCH COMPANY Balance sheet Assets Cash Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 14,550 7,900 12,800 11,200 167,500 (12,900) $ 201,050 8.690 3,000 4,300 21.360 113,700 50,000 $ 201,050 The average number of common stock shares outstanding during 2018 was 860 shares....
Following is the balance sheet of Solomon Company for 2018: SOLOMON COMPANY Balance sheet Assets Cash Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 14,750 7,620 13,160 10,750 165,500 (13,000) $198, 780 $ 8,390 3,240 4,200 21,300 113,300 48,350 $198,780 The average number of common stock shares outstanding during 2018 was 880 shares....
Following is the balance sheet of Finch Company for 2018: FINCH COMPANY Balance sheet Assets Cash $ 15,100 8,020 13,160 11,450 173,000 (12,600) $208,130 Marketable securities Accounts receivable Inventory Property and equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Current notes payable Mortgage payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity 8,930 3, 440 5,000 21,960 113,600 55,200 $208,130 The average number of common stock shares outstanding during 2018 was 860 shares. Net...
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