Huntsman Corp. completed a plant expansion using financing as follows: $9 million from mortgages, $3 million from retained earnings, and $4million from cash on hand, The debt-to-equity mix was closest to:a. 56-44b. 75-25c. 44-56d. 25-75
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Huntsman Corp. completed a plant expansion using financing as follows: $9 million from mortgages, $3 million from retained earnings, and $4
million from cash on hand, The debt-to-equity mix was closest to:
a. 56-44
b. 75-25
c. 44-56
d. 25-75
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Solved in 2 steps
- Consider the following data for the firms Acme and Apex: Equity ($ million) Debt ($ million) ROC Cost of Capital Acme 290 145 17% 9% Apex 1,450 483 15% 10% a. Calculate the economic value added for Acme and Apex (round to 2 decimal places). Economic value added for Acme $? million Economic value added for Apex $? million b. Calculate the economic value added per dollar of invested capital for Acme and Apex (round to 2 decimal places)? Economic value added for Acme per dollar Economic value added for Apex per dollarQuestion Robinson plc have decided that in order to make better investment appraisal decisions they need to re-calculate the company's cost of capital. The following information is extracted from the company's statement of financial position (balance sheet): £ (millions) Fixed assets: 890 Current assets: 370 Current liabilities: (220) Non-current liabilities: 5% Bonds (£100 par) redeemable in 7 years (160) 4% Irredeemable Bonds (£100 par) (190) Bank Loan (120) Share capital and reserves Ordinary Shares (nominal value 50p)___ 180 7% Preference shares (£1 nominal value) 100 Reserves 290 Additional information: The risk-free rate of return on short-dated government bonds is currently 3%. The market risk premium has been estimated at 7% and the company's beta is 1.5. The company's ordinary share price is £3 and the preference share price is £0.8. The irredeemable bonds are currently trading at a 5% discount to par value and the redeemable bonds are currently trading at £105. The rate of…Consider the following data for the firms Acme and Apex: Acme Apex Required: Equity Debt ($ million) ($ million) 210 1,050 105 350 ROC Cost of Capital (*) (%) 17% 9% 15% 10% a-1. Calculate the economic value added for Acme and Apex. a-2. Which firm has the higher economic value added? b-1. Calculate the economic value added per dollar of invested capital for Acme and Apex. b-2. Which firm has the higher economic value added per dollar of invested capital? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B1 Required B2 Calculate the economic value added for Acme and Apex. Note: Enter your answers in millions rounded to 2 decimal places. Economic value added for Acme million Economic value added for Apex million
- A financial analyst is in the process of estimating the cost of capital of Gewicht GmbH. The following informnation is obtained from the company web pages. Market value of debt: $50 million • Market value of equity: $600 million Table 1. Primary competitors and capital structures (in millions) Market value of Market value of Competitor debt equity A $25 $50 B $101 $190 C $40 $60 QUESTIONS: What are Gewicht GmbH target capital structure (DV and E/V) if the analyst uses current capital structure? und numberto four decimalpla to report the results Options: 0.4213 0.4921 0,4545 0,5454 D/V v ENABC Corp is a manufacturing company with the following information: 1, Financial Statements: Net Income: $10 million Depreciation: 55 million Capital Expenditures (CapEx): $8 million Changes in Working Capital. $2 million (increase) 2. Balance Sheet Total Debt: $40 million (long-term debt) Total Equity: $60 million Total Assets $100 million 3. Market information: Risk Free Rate: 3% Market Risk Premium: 5% Comparable Companies Unlevered Beta 1.0 (overage of industry peers) Tax Rate: 30% Current Stock Price: $25 per share Number of Shares Oustanding 4 million 4. Assumptions: Terminal Growth Rate: 5% Long-term WACC: 0.25% less than the Initial WACC Questions: a. Calculate the Free Cash Flow to the Firm (FCFF) for ABC Corp for the next five years. b. Determine the Cost of Equily using the Capital Asset Pricing Model (CAPM) with unleverted bela. c. Cakulate the Levered Beta for ABC Corp by using the industry average unlovered beta and the company's capital structure d. Calculate the Cost of…ABC Corp is a manufacturing company with the following information: 1. Financial Statements: • Net Income: $10 million • Depreciation: $5 million • Capital Expenditures (CapEx): $8 million • Changes in Working Capital: $2 million (increase) 2. Balance Sheet: Total Debt: $40 million (long-term debt). Total Equity: $60 million • Total Assets: $100 million 3. Market Information: • Risk - Free Rate: 3% • Market Risk Premium: 5%. Comparable Companies' Unlevered Beta: 1.0 (average of industry peers) • Tax Rate: 30% . Current Stock Price: $25 per share • Number of Shares Outstanding: 4 million 4. Assumptions: • Terminal Growth Rate: 5%. Long-term WACC: 0.25% less than the initial WACC Questions: a. Calculate the Free Cash Flow to the Firm (FCFF) for ABC Corp for the next five years. b. Determine the Cost of Equity using the Capital Asset Pricing Model (CAPM) with unlevered beta.c. Calculate the Levered Beta for ABC Corp by using the industry average unlevered beta and the company's capital…
- c-2. The degree of financial leverage for all three methods after expansion. Assume sales of $8.5 million for this question. Note: Round your answers to 2 decimal places. 100% Debt 100% Equity 50% Debt & 50% Equity Degree of Financial Leverage d. Compute EPS under all three methods of financing the expansion at $8.5 million in sales (first year) and $10.3 million in sales (last year). Note: Round your answers to 2 decimal places. 100% Debt 100% Equity 50% Debt & 50% Equity Earnings per Share First Year Last YearYou are given the following information concerning a firm: (please show work) Assets required for operation: $5,000,000 Revenues: $8,400,000 Operating expenses: $7,900,000 Income tax rate: 40%. Management faces three possible combinations of financing: 100% equity financing 30% debt financing with a 6% interest rate 60% debt financing with a 6% interest rate a) What is the net income for each combination of debt and equity financing? b) What is the return on equity for each combination of debt and equity financing? c) If the interest rate had been 12 percent instead of 6 percent, what would be the return on equity for each combination of debt and equity financing?2. An AA-rated, 1-year commercial loan to a firm with the following financial statement information (in millions of dollars): Assets Cash Accounts receivables Inventory Plant and equipment Total assets $ 40 120 215 1,100 $1,475 Liabilities and Equity Accounts payable Notes payable Accruals Long-term debt Equity (ret. earnings = $200) Total liabilities and equity $ 55 60 75 550 735 $1,475 Also assume sales = $1,275, cost of goods sold = $930, taxes = $70, interest payments = $100, and net income = $175, and the market value of equity is equal to 2.1 times the book value. MC Bancorp uses the Altman's Z score model to evaluate AA-rated loans.
- 11. SMART Corporation raises P500,000 in long-term debt to acquire additional plant capacity. This is consideredA. an investment cash flow.B. a financing cash flow.C. a financing cash flow and investment cash flow, respectively.D. a financing cash flow and operating cash flow, respectively.2:01 mylab.pearson.com/S Data table (Related to Checkpoint 4.2) (Capital structure analysis) The liabilities and owners' equity for Campbell Industries is found here: Accounts payable Notes payable Current liabilities Long-term debt Common equity a. What percentage of the firm's assets does the firm finance using debt (liabilities)? b. If Campbell were to purchase a new warehouse for $1.2 million and finance it entirely with long-term debt, what would be the firm's new debt ratio? $514,000 $255,000 $769,000 $1,294,000 $5,326,000 Total liabilities and equity $7,389,000 Click on the icon in order to copy its contents into a spreadsheet.) a. What percentage of the firm's assets does the firm finance using debt (liabilities)? The fraction of the firm's assets that the firm finances using debt is 27.21 %. (Round to one decimal place.) Print ||| = 1 LTE2.II 4G Done + @ O I 72% 2 : XGiven the following Year 9 selected balance sheet data: Assets Cash on Hand Total Current Assets Total Fixed Asset Investments Total Assets Liabilities and Shareholder Equity Accounts Payable Overdraft Loan Payable 1-Year Bank Loan Payable Current Portion of Long-Term Loans $116,000 235,000 230,000 $465,000 $ 56,000 0 0 17,000 Total Current Liabilities 73,000 Long-Term Bank Loans 46,000 Total Liabilities 119,000 Year 8 Year 9 Shareholder Equity: Balance Change Common Stock (at a par value of $0.50 per share 10,050 0 10,050 Additional Capital 81,500 0 81,500 Retained Earnings Total Shareholder Equity Total Liabilities and Shareholder Equity 162,450 92,000 254,450 254,000 +92,000 346,000 $465,000 Based on the above figures and the definition of the debt:equity percentages (or debt%:equity%) presented in the Help section for p. 5 of the Camera and Drone Journal, the company's debt:equity percentages (rounded to the nearest whole percentage--like 25% and 75%) and its current ratio are