The current balance sheet of Bramble Inc. reports total assets of $24 million, total liabilities of $6 million, and stockholders' equity of $18 million. Bramble is considering several financing possibilities in order to expand operations. What will be the effect on Bramble's debt to assets ratio if Bramble issues an additional $6 million in stock to finance its expansion? O The debt to assets ratio will decrease from 0.2500(6/24) to 0.2000 (6/30) after the additional stock sale. O The debt to assets ratio will increase from 24 before to 30 after the additional investment. O The additional stock issuance will have no effect on the debt to assets ratio. O The debt to assets ratio will decrease from 6/18 before to 6/30 after the additional stock sale.
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- Broom Co. has a total debt of $420,000 and shareholders’ equity of $700,000. Broom is seeking capital to fund an expansion. Broom is planning to issue an additional $300,000 in common stock, and is negotiating with a bank to borrow additional funds. The bank is requiring a debt-to-equity ratio of 0.75. what is the maximum additional amount Broom will be able to borrow?The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise fundsas additional notes payable and use them to increase inventory. How muchcan Nelson’s short-term debt (notes payable) increase without pushing itscurrent ratio below 2.0? What will be the firm’s quick ratio after Nelson hasraised the maximum amount of short-term funds?(Financing decisions) Brussels Electronics, Inc, has total assets of $64 million and total debt of $45 million. The company also has operating profits of $23 millions with interest expenses of $7 million. a. What is Brussels Electronic's debt ratio? b. What is Brussels Electronic's time interest earned? c. Based on the information above, would you recommend to Brussels Electron-ics's management that the firm is in a strong enough position to assume more debt and increase interest expense to $9 million?
- The Nelson Company has $1,485,000 in current assets and $495,000 in current liabilities. Its initial inventory level is $365,000, and it will raise funds as additional notes payable and use them to increase inventory. A. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 2.0? Do not round intermediate calculations. Round your answer to the nearest dollar. B. What will be the firms's quick ratio after Nelson has raised the maximum amount of short-term funds? do not round intermediate calculations. Round your answer to two decimal places.The liabilities and owners’ equity for Campbell Industries is found here. What percentage of the firm’s assets does the firm now finance using debt (liabilities)? If Campbell were to purchase a new warehouse for $1.4 million and finance it entirely with long-term debt, what would be the firm’s new debt ratio?Labrador technologies Inc. plans to become public soon. The board of directors would like to know the value of common equity and have asked for your opinion. The firm has $1,249,917 in preferred equity and the market value of its outstanding debt equals $2,049,396. The WACC for this firm is estimated to be 8.92%. For this example assume the current assets are zero. Use the DCF valuation model with the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 3.0% rate after Year 5. Rounding to the nearest penny, what is the value of common equity? Free Cash Period Flow Year 1 $1,370,274 Year 2 $1,761,479 Year 3 $1,909,652 Year 4 $2,361,090 Year 5 $2,744,645
- Charter Enterprises currently has $1.5 million in total assets and is totally equity financed. It is contemplating a change in its capital structure. Compute the amount of debt and equity that would be outstanding if the firm were to shift to each of the following debt ratios: 10%, 20%, 30%, 40%, 50%, 60%, 90%. (Note: The amount of total assets would not change.) Is there a limit to the debt ratio's value?Rian Corporation is currently working without using debt. The estimated operating profit per year is $16.065,180.00 while the equity capitalization rate (ke) is 18% pa. In the coming year, Rian is considering replacing some of his shares with a debt of $50 million, with an interest rate of 15% per annum. Question: a. Calculate the value of own capital capitalization (CS), the total capitalization value of the company (V), and the overall capitalization rate (ko) using the Net Income Approach. b. Calculate the amount of equity capitalized value, total capitalization value of the company, and overall capitalization rate using the traditional approach, if additional debt causes the equity capitalization rate (ke) to increase to 20%. c. Draw a graph of the two approaches.Acclaim Entertainment Ltd, which has been trading profitably for many years, is planning to expand the business to meet the increasing demand for its services. The issue price of all shares is $1.25. It plans to invest $4 000 000 to finance this expansion, and as a result achieve an increase in profit before interest on debt and income tax of $800 000. A summary of financial results for the financial year ended 30 June 2022 is presented below: Income Expenses (excluding interest and income tax) Interest expense Profit before income tax Income tax (30%) Profit Earnings per share $ 6 500 000 (4 923 000) (77 000) 1 500 000 450 000 $ 1 050 000 0.25 Management is considering whether to finance the expansion by selling 3 200 000 shares at $1.25 per share or by issuing 8% 10 year debentures at a nominal value of $100 each. Required: (a) Assuming that the company achieves the expected increase in profit from the expansion, what will be the earnings per share for each of the alternative methods…
- If Campbell were to purchase a new warehouse for 1.1 million and finance it entirely with long-term debt, what would be the firm's new debt ratio? The new debt ratio will be account payable 495,000 notes payable 243,000 current liabilities 738,000 long term debt 1,207,000 common equity 5,079,000 total liabilities and equity 7,024,000Nelson Company's current liabilities are P50,000, its long-term liabilities are P150,000, and its working capital is P80,000. If Nelson Company's debt-to-equity ratio is 0.32, its total long-term assets must equal O P625,000 O P825,000 O P745,000 O P695.000 Hydro Cable wishes to calculate their return on assets (ROA). You know that the return on equity (ROE) is 12% and that the debt ratio is 40%. What is the ROA? 0 4.8% O 20% 0 7.2% O 12% Tech Manufacturing Company realized P15,000,000 in sales, with a cost of goods sold of P6,000,000, gross profit margin of 45% of net sales, operating expenses of P4,500,000, tax rate of 35%, and average total assets of P6,500,000. What is Tech's Return on Assets (ROA)? O 42.5% O 50% O 45% O 47.75%Hancock Corp has the following operating results and capital structure. The firm is contemplating a capital restructuring to 60% debt. Its stock is currently selling for book value at $25 per share. The interest rate is 9%, and combined state and federal taxes are 42%. Show all of your calculation work and label all of your work so I can follow your calculation process. 1. Complete current income statement and balance sheet and income statement under proposed capital structure. 2. Calculate EPS under the current and proposed capital structures. 3. Calculate the DFL under both structures. Current ProposedINCOME STATEMENT Revenue $6,000,000 $6,000,000 Cost/Expense 4,500,000 4,500,000EBIT $1,500,000 1,500,000 Interest (9%) EBT Tax (42%) EAT (Net Income) BALANCE SHEET Debt $1,200,000…