Question

16. Total Assets in 2020 are predicted to be A) $32,357 B) $2,592 C) $33,975 D) $30,603 17. The equity for 2020 is expected to be A) $9,645 B) $10,778 C) $10,060 D) $10,812 18. An increase in the payout ratio will decrease the internal growth rate, other things equal. A) True B) False 19. Which of the following would DECREASE net cash flow from operating activities? A) An increase in accounts receivable B) An increase in long term debt C) An increase in accounts payable D) None of the above 20. The total book value of WTC's equity is $13 million, and book value per share is $26. The stock has a market-to-book ratio of 1.5, and the cost of equity is 15%. The firm's bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 10%, and the firm's tax rate is 21%. What is the company's WACC? A) 14.26% B) 13.89% C) 9.25%

Answer 1

15.Total assets in 2019 is 26,964

growth rate is = 20%

so assets in 2020 is = 26,964+20% = 32,356.8 = 32,357

16.Equity in 2019 is =8,982

growth rate = 20%

so equity in 2020 = 8,982+20% = 10,778

17.The given statement is correct. Increase in growth rate will leads to increase in the plowback ratio. payout ratio is reciprocal of plowback ratio. since increase in growth rate will leads to decrease in the payout ratio. so increase in payout ratio will leads to decrease in growth rate.

so the given statement is correct.

18. Increase in current assets will decrease the net cash flow from operating activities. Accounts receivable is current assets so increase in accounts receivable will decreases the net cash flows. Increase in current assets happened with usage of cash. so it decrease the cash flow.