Denver Springs predicts that this year's sales will total $7,500,000. The selling price for their software...
- Denver Springs predicts that this year's sales will total $7,500,000. The selling price for their software is $135 per unit. Variable costs amount to $80 per unit. The firm also has $6,000,000 in bonds outstanding with a coupon interest rate of 11%. Net income is projected to be $139,500. The firm's marginal tax rate is 34%. What is the firm's total fixed costs?
Homework Answers
Answer :
Earning Before Interest and Tax = Sales - Variable Cost - Fixed Cost.........(1)
Calulation of Earning Before Interest and Tax
Earning Before Tax = Earning Before Interest and Tax - Interest
As net income is after tax so it represesnts 66% (100% - 34%) of Earning Before Tax
Therefore Earning Before Tax = 139500 / 0.66 = 211363.636363
211363.636363 = Earning Before Interest and Tax - (6,000,000 * 11%)
Earning Before Interest and Tax = 211,363.636363 + 660,000
Earning Before Interest and Tax = 871,363.636363
Putting Earning Before Interest and Tax in Equation (1)
Earning Before Interest and Tax = 7,500,000 - [(7,500,000 / 135) * 80] - Fixed Cost
871363.636363 = 7,500,000 - 4,444,444.44444 - Fixed Cost
==>Fixed Cost = 7,500,000 - 4,444,444.44 - 871,363.636363
= 2,184,191.9192 or 2,184,191.92
Add Answer to:
Denver Springs predicts that this year's sales will total
$7,500,000. The selling price for their software...
Additional Problems with Answers Problem 1 Cost of debt for a firm: You have been assigned...
Additional Problems with Answers Problem 1 Cost of debt for a firm: You have been assigned the task of estimating the after-tax cost of debt for a firm as part of the process in determining the firm's cost of capital. After doing some checking, you find out that the firm's original 20-year 9.5% coupon bonds (paid semi-annually), currently have 14 years until they mature and are selling at a price of $1,100 each. You are also told that the investment...
Denver Interiors has 60,000 shares of common stock outstanding at a price per share of $46....
Denver Interiors has 60,000 shares of common stock outstanding at a price per share of $46. The firm also has 20,000 shares of preferred stock outstanding at a price per share of $55. There are 1,500 outstanding bonds with a face value of $1,000 and a price quote of 99.4. What is the capital structure weight of the preferred stock? 18.87 percent 21.38 percent 21.09 percent 20.56 percent 3. Meiston Press has a debt-equity ratio of 1.40. The pre-tax cost...
Jefferson Steel requires $15 million to fund its current year's capital projects. Jefferson will finance part of i...
Jefferson Steel requires $15 million to fund its current year's capital projects. Jefferson will finance part of its needs with equity. The firm's common stock is selling in the market at $180 per share. Dividends of $1 per share were recently paid (Do). Dividend growth of 6 percent per year is expected for the foreseeable future. The market is currently demanding a 6 percent premium on the average risk stock and Tbonds are currently yielding 3%. Preferred stock is selling...
Jefferson Steel requires $15 million to fund its current year's capital projects. Jefferson will finance part of i...
Jefferson Steel requires $15 million to fund its current year's capital projects. Jefferson will finance part of its needs with equity. The firm's common stock is selling in the market at $180 per share. Dividends of $1 per share were recently paid (Do). Dividend growth of 6 percent per year is expected for the foreseeable future. The market is currently demanding a 6 percent premium on the average risk stock and Tbonds are currently yielding 3%. Preferred stock is selling...
?(Individual or component costs of? capital)?Compute the cost of capital for the firm for the? following:...
?(Individual or component costs of? capital)?Compute the cost of capital for the firm for the? following: a. A bond that has a ?$1,000 par value? (face value) and a contract or coupon interest rate of 10.3 percent. Interest payments are ?$51.50 and are paid semiannually. The bonds have a current market value of ?$1,128 and will mature in 10 years. The? firm's marginal tax rate is 34 percent. b. A new common stock issue that paid a ?$1.82 dividend last...
You are analyzing the after-tax cost of debt for a firm. You know that the firm's...
You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 15.50 percent semiannual coupon bonds are selling at a price of $1,117.25. These bonds are the only debt outstanding for the firm. (a1) Your answer is correct. What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.) YTM 13.50 % e Textbook and Media Attempts: 1 of 2 used (22) What is the after-tax cost...
(Individual or component costs of capital) Compute the cost of capital for the firm for the...
(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.2 percent. Interest payments are $56.00 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.84 dividend...
(Individual or component costs of capia Compute the cost of capital for the firm for the...
(Individual or component costs of capia Compute the cost of capital for the firm for the following a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.8 percent. Interest payments are $54.00 and are paid semiannually The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. Anew common stock issue that paid a $1.83 dividend last...
(Individual or component costs of capital) Your firm is considering a new investment proposal and would...
(Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following: a. A bond that has a $1.000 par value (face value) and a contract or coupon interest rate of 12.4 percent that is paid semiannually. The bond is currently selling for a price of $1,125 and will mature in 10...
You are analyzing the after-tax cost of debt for a firm. You know that the firm's...
You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 14.50 percent semiannual coupon bonds are selling at a price of $1,089.93. These bonds are the only debt outstanding for the firm. (21) Your answer is correct. What is the current YTM of the bonds? (Round final answer to 2 decimal places, e... 15.25%.) YTM 13.00 % eTextbook and Media Attempts: 1 of 2 used (a2) What is the after-tax cost of...
Additional Problems with Answers Problem 1 Cost of debt for a firm: You have been assigned the task of estimating the after-tax cost of debt for a firm as part of the process in determining the firm's cost of capital. After doing some checking, you find out that the firm's original 20-year 9.5% coupon bonds (paid semi-annually), currently have 14 years until they mature and are selling at a price of $1,100 each. You are also told that the investment...
Jefferson Steel requires $15 million to fund its current year's capital projects. Jefferson will finance part of its needs with equity. The firm's common stock is selling in the market at $180 per share. Dividends of $1 per share were recently paid (Do). Dividend growth of 6 percent per year is expected for the foreseeable future. The market is currently demanding a 6 percent premium on the average risk stock and Tbonds are currently yielding 3%. Preferred stock is selling...
Jefferson Steel requires $15 million to fund its current year's capital projects. Jefferson will finance part of its needs with equity. The firm's common stock is selling in the market at $180 per share. Dividends of $1 per share were recently paid (Do). Dividend growth of 6 percent per year is expected for the foreseeable future. The market is currently demanding a 6 percent premium on the average risk stock and Tbonds are currently yielding 3%. Preferred stock is selling...
You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 15.50 percent semiannual coupon bonds are selling at a price of $1,117.25. These bonds are the only debt outstanding for the firm. (a1) Your answer is correct. What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.) YTM 13.50 % e Textbook and Media Attempts: 1 of 2 used (22) What is the after-tax cost...
(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.2 percent. Interest payments are $56.00 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.84 dividend...
(Individual or component costs of capia Compute the cost of capital for the firm for the following a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.8 percent. Interest payments are $54.00 and are paid semiannually The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. Anew common stock issue that paid a $1.83 dividend last...
(Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following: a. A bond that has a $1.000 par value (face value) and a contract or coupon interest rate of 12.4 percent that is paid semiannually. The bond is currently selling for a price of $1,125 and will mature in 10...
You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 14.50 percent semiannual coupon bonds are selling at a price of $1,089.93. These bonds are the only debt outstanding for the firm. (21) Your answer is correct. What is the current YTM of the bonds? (Round final answer to 2 decimal places, e... 15.25%.) YTM 13.00 % eTextbook and Media Attempts: 1 of 2 used (a2) What is the after-tax cost of...
Most questions answered within 3 hours.
-
As a person inhales, air moves down the windpipe (bronchus),
through a constriction where the air...
asked 2 minutes ago -
Youngchang Keyboard sells a $1400 keyboard on a monthly payment
plan over 2 years.
a) If...
asked 8 minutes ago -
For a one step reaction, the activation energy for the
forward reaction is 40.0 kJ mol-1,...
asked 12 minutes ago -
1. A good thesis statement _____ .
is limited but not too narrow
is very broad...
asked 6 minutes ago -
What is the main use of a transistor and what is an Integrated
Circuit?
asked 14 minutes ago -
Intro to Java Programming
Write a method named isDivisible that takes two integers, n
and m,...
asked 12 minutes ago -
Calculate whether loci A&B are in linkage disequilibrium
(D) using the following data. Is the haplotype...
asked 31 minutes ago -
Barrington Box Enterprises has two divisions, large and small,
that share the common costs of the...
asked 35 minutes ago -
An integer number is said to be a perfect number if it is equal
to the...
asked 47 minutes ago -
What does economies of scale often fail to measure? How would
you recommend addressing this limitation?
asked 46 minutes ago -
Joanne Quick made an investment of $18,787.14. From this
investment, she will receive $2,000 annually for...
asked 54 minutes ago -
Enter your answer in the provided box. The solubility of CO2 in
water at 25°C and...
asked 1 hour ago