Ratio of Liabilities to Stockholders' Equity and Times Interest Earned
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
| Current Year | Previous Year | |||
| Accounts payable | $552,000 | $162,000 | ||
| Current maturities of serial bonds payable | 370,000 | 370,000 | ||
| Serial bonds payable, 10% | 1,520,000 | 1,890,000 | ||
| Common stock, $1 par value | 80,000 | 100,000 | ||
| Paid-in capital in excess of par | 900,000 | 900,000 | ||
| Retained earnings | 3,090,000 | 2,460,000 | ||
The income before income tax was $529,200 and $463,100 for the current and previous years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
| Current year | |
| Previous year |
b. Determine the times interest earned ratio for both years. Round to one decimal place.
| Current year | |
| Previous year |
c. The ratio of liabilities to stockholders' equity has and the times interest earned ratio has from the previous year. These results are the combined result of a income before income taxes and interest expense in the current year compared to the previous year.
In: Accounting
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
| Current Year | Previous Year | |||
| Accounts payable | $604,000 | $290,000 | ||
| Current maturities of serial bonds payable | 530,000 | 530,000 | ||
| Serial bonds payable, 10% | 2,370,000 | 2,900,000 | ||
| Common stock, $1 par value | 90,000 | 110,000 | ||
| Paid-in capital in excess of par | 960,000 | 970,000 | ||
| Retained earnings | 3,330,000 | 2,640,000 | ||
The income before income tax was $1,044,000 and $913,500 for the current and previous years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
| Current year | |
| Previous year |
b. Determine the times interest earned ratio for both years. Round to one decimal place.
| Current year | |
| Previous year |
c. The ratio of liabilities to stockholders' equity has and the times interest earned ratio has ___ from the previous year. These results are the combined result of a ___ income before income taxes and interest expense in the current year compared to the previous year.
In: Accounting
7A) Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.9
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $2,190,000 in
annual sales, with costs of $815,000. If the tax rate is 35
percent, what is the OCF for this project? Suppose the required
return on the project is 12 percent. What is the project's
NPV?
7B) In the previous problem, suppose the project requires an
initial investment in net working capital of $300,000, and the
fixed asset will have a market value of $210,000 at the end of the
project. What is the project's Year 0 net cash flow? Year 1? Year
2? Year 3? What is the new NPV?
7C) Suppose the fixed asset actually falls into the three-year
MACRS class. All the other facts are the same. What is the
project's Year 1 net cash flow now? Year 2? Year 3? What is the new
NPV?
Please include ALL Excel formulas in your answer. Shortened version please.
In: Finance
A Belgium subsidiary's beginning and ending trial balances appear below:
|
Dr (Cr) |
|
January 1 |
December 31 |
|
|
Cash, receivables |
€ 1,500 |
€ 1,200 |
|
Inventories |
3,000 |
3,500 |
|
Plant & equipment, net |
30,000 |
39,000 |
|
Liabilities |
(18,500) |
(27,200) |
|
Capital stock |
(4,000) |
(4,000) |
|
Retained earnings, beginning |
(12,000) |
(12,000) |
|
Sales revenue |
-- |
(15,000) |
|
Cost of sales |
9,500 |
|
|
Out-of-pocket selling & administrative expenses |
-- |
4,000 |
|
Depreciation expense |
-- |
1,000 |
|
Total |
€ 0 |
€ 0 |
Exchange rates ($/€) are:
|
Beginning of year |
$1.25 |
|
Average for year |
1.22 |
|
End of year |
1.20 |
The subsidiary was acquired at the beginning of the year. Its
sales, inventory purchases, and out-of-pocket selling and
administrative expenses occurred evenly during the year. Equipment
was purchased for €10,000 when the exchange rate was $1.23.
Depreciation for the year includes €200 related to the equipment
purchased during the year. The ending inventory was purchased at
the end of the year, and the beginning inventory was purchased at
the end of the previous year.
If the subsidiary's functional currency is the U.S. dollar, what is
the remeasurement gain or loss for the year?
| A. |
$1,030 gain |
|
| B. |
$1,130 gain |
|
| C. |
$2,020 loss |
|
| D. |
$ 810 loss |
In: Accounting
A Belgium subsidiary's beginning and ending trial balances appear below:
|
Dr (Cr) |
|
January 1 |
December 31 |
|
|
Cash, receivables |
€ 1,500 |
€ 1,200 |
|
Inventories |
3,000 |
3,500 |
|
Plant & equipment, net |
30,000 |
39,000 |
|
Liabilities |
(18,500) |
(27,200) |
|
Capital stock |
(4,000) |
(4,000) |
|
Retained earnings, beginning |
(12,000) |
(12,000) |
|
Sales revenue |
-- |
(15,000) |
|
Cost of sales |
9,500 |
|
|
Out-of-pocket selling & administrative expenses |
-- |
4,000 |
|
Depreciation expense |
-- |
1,000 |
|
Total |
€ 0 |
€ 0 |
Exchange rates ($/€) are:
|
Beginning of year |
$1.25 |
|
Average for year |
1.22 |
|
End of year |
1.20 |
The subsidiary was acquired at the beginning of the year. Its
sales, inventory purchases, and out-of-pocket selling and
administrative expenses occurred evenly during the year. Equipment
was purchased for €10,000 when the exchange rate was $1.23.
Depreciation for the year includes €200 related to the equipment
purchased during the year. The ending inventory was purchased at
the end of the year, and the beginning inventory was purchased at
the end of the previous year.
If the subsidiary's functional currency is the euro, what is the
translation gain or loss for the year?
| A. |
$810 loss |
|
| B. |
$1,130 gain |
|
| C. |
$2,020 loss |
|
| D. |
$1,030 gain |
In: Accounting
On January 1, Year 1, Webb Construction Company overhauled four
cranes, resulting in a slight increase in the life of the cranes.
Such overhauls occur regularly at two-year intervals and have been
treated as a maintenance expense in the past. Management is
considering whether to capitalize this year’s $28,420 cash cost in
the Cranes asset account or to expense it as a maintenance expense.
Assume that the cranes have a remaining useful life of two years
and no expected salvage value. Assume straight-line
depreciation.
Required
a. Determine the amount of additional depreciation
expense Webb would recognize in Year 1 and Year 2 if the cost were
capitalized in the Cranes account.
b. Determine the amount of expense Webb would
recognize in Year 1 and Year 2 if the cost were recognized as
maintenance expense.
c. Determine the effect of the overhaul on cash
flow from operating activities for Year 1 and Year 2 if the cost
were capitalized and expensed through depreciation charges.
d. Determine the effect of the overhaul on cash
flow from operating activities for Year 1 and Year 2 if the cost
were recognized as maintenance expense.
In: Accounting
|
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,040,000 in annual sales, with costs of $743,000. The project requires an initial investment in net working capital of $260,000, and the fixed asset will have a market value of $280,000 at the end of the project. |
| If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (MACRS schedule) (Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) |
| Years | Cash Flow |
| Year 0 | $ -2840000 |
| Year 1 | $ 1148390.76 |
| Year 2 | $ 1245935.4 |
| Year 3 | $ ? |
| NPV ? | |
|
If the required return is 15 percent, what is the project's NPV? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) |
In: Finance
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon paid semi-annually. Calculate its price for each of the following three YTM scenarios: 4.0%, 6.0%, and 8.0%.
| Input: | Output: | |
| Par ($) | 1,000.00 | |
| Years to maturity | 100 | |
| Annual coupon rate | 6.50% | |
| Coupons per year | 2 | Price |
| Yield to maturity | 4.0% | |
| Yield to maturity | 6.0% | |
| Yield to maturity | 8.0% |
KFA is evaluating a project with the following cash flows in the first 4 years: $4,000, $5,000, $6,000, and $7,000. Use an 8.0% discount rate to calculate the project's net present values (NPV) for three potential initial investments: $11,000 (scenario 1), $13,000 (scenario 2), and $15,000 (scenario 3). Assume no residual value.
| Input: | Output: | Scenario | ||||
| Cash Inflows: | 1 | 2 | 3 | |||
| Year 1 | 4,000.00 | Start | ||||
| Year 2 | 5,000.00 | Year 1 | ||||
| Year 3 | 6,000.00 | Year 2 | ||||
| Year 4 | 7,000.00 | Year 3 | ||||
| Discount rate | 8.0% | Year 4 | ||||
| Initial cost: | ||||||
| Scenario 1 | 11,000.00 | NPV | ||||
| Scenario 2 | 13,000.00 | |||||
| Scenario 3 | 15,000.00 | |||||
In: Finance
Hathaway Health Club sold three-year memberships at a reduced
rate during its opening promotion. It sold 1,000 three-year
nonrefundable memberships for $354 each. The club expects to sell
100 additional three-year memberships for $885 each over each of
the next two years. Membership fees are paid when clients sign up.
The club's bookkeeper has prepared the following income statement
for the first year of business and projected income statements for
Years 2 and 3.
Cash-basis income statement:
| Year 1 | Year 2 | Year 3 | |
| Sales | $354,000 | $88,500 | $88,500 |
| Equipment* | $118,000 | $0 | $0 |
| Salaries and wages | 49,900 | 49,900 | 49,900 |
| Advertising | 5,110 | 5,110 | 5,110 |
| Rent and utilities | 32,430 | 32,430 | 32,430 |
| Net income (loss) | $148,560 | $1,060 | $1,060 |
*Equipment was purchased at the beginning of year 1 for $118,000 and is expected to last for three years and then to be worth $1,180.
Required:
Convert the income statements for each of the three years to the accrual basis. Indicate a net loss with a minus sign.
| Hathaway Health Club | |||
| Income Statements | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $ | $ | $ |
| Expenses: | |||
| Depreciation | $ | $ | $ |
| Salaries and wages | |||
| Advertising | |||
| Rent and utilities | |||
| Total expenses | $ | $ | $ |
| Net income (loss) | $ | $ | $ |
In: Accounting
|
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $318,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,710,000. The cost of the machine will decline by $105,000 per year until it reaches $1,185,000, where it will remain. |
|
If your required return is 13 percent, calculate the NPV today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
|
If your required return is 13 percent, calculate the NPV if you wait to purchase the machine until the indicated year. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
| Year 5 | $ |
| Year 6 | $ |
| Should you purchase the machine? |
|
| If so, when should you purchase it? |
|
This is all the information I was provided with for this question. There was nothing more provided.
In: Finance