Which of following statements is not correct? (explain why D is
correct answer)
a) Accounts payable,...
Which of following statements is not correct? (explain why D is
correct answer)
a) Accounts payable, accruals, and deferred taxes are not
sources of funding that come from investors, so they are not
included in the calculation of the cost of capital.
b)Capital components are sources of funding that come from
investors: debt, preferred stock, common equity.
c) Tax effects associated with financing can be incorporated
either in capital budgeting cash flows or in cost of capital.
d) The cost...
Which of the following statements is NOT correct?
a. When estimating the cost of debt, don’t...
Which of the following statements is NOT correct?
a. When estimating the cost of debt, don’t use the coupon rate
on existing debt.
b.Use the current interest rate on new debt. When estimating the
risk premium for the CAPM approach, don’t subtract the current
long-term T-bond rate from the historical average return on common
stocks.
c. Use the target capital structure to determine the weights. If
you don’t know the target weights, then use the current book value
of equity...
Current assets
$38,000,000
Accounts Payable
$10,000,000
Accruals
$9,000,000
Net plant, property & equipment
$101,000,000
Current Liabilities...
Current assets
$38,000,000
Accounts Payable
$10,000,000
Accruals
$9,000,000
Net plant, property & equipment
$101,000,000
Current Liabilities
$19,000,000
Long term debt (40,000 bonds, $1,000 face value)
$40,000,000
Common Stock (10,000,000 shares)
$30,000,000
Retained Earnings
$50,000,000
Total shareholders equity
$80,000,000
Total Assets
$139,000,000
Total Liabilities and shareholders Equity
$139,000,000
Your boss has asked you to estimate the weighted average cost of
capital for CGT company. You have the above balance sheet and this
information:
CGT stock is currently selling for $7.50 per...
Category
Prior Year
Current Year
Accounts payable
???
???
Accounts receivable
320,715
397,400
Accruals
40,500
33,750...
Category
Prior Year
Current Year
Accounts payable
???
???
Accounts receivable
320,715
397,400
Accruals
40,500
33,750
Additional paid in capital
500,000
541,650
Cash
17,500
47,500
Common Stock
94,000
105,000
COGS
328,500
430,648.00
Current portion long-term debt
33,750
35,000
Depreciation expense
54,000
54,589.00
Interest expense
40,500
41,638.00
Inventories
279,000
288,000
Long-term debt
335,232.00
400,937.00
Net fixed assets
946,535
999,000
Notes payable
148,500
162,000
Operating expenses (excl. depr.)
126,000
162,603.00
Retained earnings
306,000
342,000
Sales
639,000
845,746.00
Taxes
24,750
48,445.00
What is...
Category
Prior Year
Current Year
Accounts payable
???
???
Accounts receivable
320,715
397,400
Accruals
40,500
33,750...
Category
Prior Year
Current Year
Accounts payable
???
???
Accounts receivable
320,715
397,400
Accruals
40,500
33,750
Additional paid in capital
500,000
541,650
Cash
17,500
47,500
Common Stock
94,000
105,000
COGS
328,500
430,068.00
Current portion long-term debt
33,750
35,000
Depreciation expense
54,000
55,705.00
Interest expense
40,500
42,293.00
Inventories
279,000
288,000
Long-term debt
338,413.00
400,233.00
Net fixed assets
946,535
999,000
Notes payable
148,500
162,000
Operating expenses (excl. depr.)
126,000
162,082.00
Retained earnings
306,000
342,000
Sales
639,000
846,942.00
Taxes
24,750
48,751.00
What is...
Item
Prior year
Current year
Accounts payable
8,128.00
7,941.00
Accounts receivable
6,018.00
6,795.00
Accruals
1,018.00
1,562.00...
Item
Prior year
Current year
Accounts payable
8,128.00
7,941.00
Accounts receivable
6,018.00
6,795.00
Accruals
1,018.00
1,562.00
Cash
???
???
Common Stock
11,706.00
11,191.00
COGS
12,675.00
18,387.00
Current portion long-term debt
5,052.00
4,980.00
Depreciation expense
2,500
2,758.00
Interest expense
733
417
Inventories
4,103.00
4,807.00
Long-term debt
13,983.00
13,499.00
Net fixed assets
50,428.00
54,010.00
Notes payable
4,377.00
9,836.00
Operating expenses (excl. depr.)
13,977
18,172
Retained earnings
28,828.00
29,707.00
Sales
35,119
46,562.00
Taxes
2,084
2,775
What is the firm's dividend payment in the...
Item
Prior year
Current year
Accounts payable
8,128.00
7,941.00
Accounts receivable
6,018.00
6,795.00
Accruals
1,018.00
1,562.00...
Item
Prior year
Current year
Accounts payable
8,128.00
7,941.00
Accounts receivable
6,018.00
6,795.00
Accruals
1,018.00
1,562.00
Cash
???
???
Common Stock
11,706.00
11,191.00
COGS
12,675.00
18,387.00
Current portion long-term debt
5,052.00
4,980.00
Depreciation expense
2,500
2,758.00
Interest expense
733
417
Inventories
4,103.00
4,807.00
Long-term debt
13,983.00
13,499.00
Net fixed assets
50,428.00
54,010.00
Notes payable
4,377.00
9,836.00
Operating expenses (excl. depr.)
13,977
18,172
Retained earnings
28,828.00
29,707.00
Sales
35,119
46,562.00
Taxes
2,084
2,775
What is the firm's dividend payment in the...
Item
Prior year
Current year
Accounts payable
8,103.00
7,920.00
Accounts receivable
6,081.00
6,779.00
Accruals
1,043.00
1,417.00...
Item
Prior year
Current year
Accounts payable
8,103.00
7,920.00
Accounts receivable
6,081.00
6,779.00
Accruals
1,043.00
1,417.00
Cash
???
???
Common Stock
10,524.00
11,795.00
COGS
12,770.00
18,133.00
Current portion long-term debt
4,987.00
4,938.00
Depreciation expense
2,500
2,804.00
Interest expense
733
417
Inventories
4,203.00
4,801.00
Long-term debt
14,544.00
14,175.00
Net fixed assets
51,114.00
54,532.00
Notes payable
4,331.00
9,834.00
Operating expenses (excl. depr.)
13,977
18,172
Retained earnings
28,988.00
30,369.00
Sales
35,119
47,583.00
Taxes
2,084
2,775
What is the firm's cash flow from
financing?
Category
Prior year
Current year
Accounts payable
41,400
45,000
Accounts receivable
115,200
122,400
Accruals
16,200
13,500...
Category
Prior year
Current year
Accounts payable
41,400
45,000
Accounts receivable
115,200
122,400
Accruals
16,200
13,500
Additional paid in capital
200,000
216,660
Cash
???
???
Common Stock @ par value
37,600
42,000
COGS
131,400
177,758.00
Depreciation expense
21,600
22,063.00
Interest expense
16,200
16,224.00
Inventories
111,600
115,200
Long-term debt
135,000
137,651.00
Net fixed assets
376,251.00
399,600
Notes payable
59,400
64,800
Operating expenses (excl. depr.)
50,400
61,943.00
Retained earnings
122,400
136,800
Sales
255,600
335,881.00
Taxes
9,900
19,137.00
What is the current year's...
Item
Prior year
Current year
Accounts payable
8,165.00
7,760.00
Accounts receivable
6,012.00
6,697.00
Accruals
970.00
1,490.00...
Item
Prior year
Current year
Accounts payable
8,165.00
7,760.00
Accounts receivable
6,012.00
6,697.00
Accruals
970.00
1,490.00
Cash
???
???
Common Stock
11,415.00
11,427.00
COGS
12,726.00
18,347.00
Current portion long-term debt
5,027.00
5,055.00
Depreciation expense
2,500
2,776.00
Interest expense
733
417
Inventories
4,194.00
4,776.00
Long-term debt
13,983.00
14,297.00
Net fixed assets
51,311.00
54,134.00
Notes payable
4,389.00
9,896.00
Operating expenses (excl. depr.)
13,977
18,172
Retained earnings
28,625.00
29,256.00
Sales
35,119
47,596.00
Taxes
2,084
2,775
What is the firm's cash flow from operations?