The Howland Carpet Company has grown rapidly during the past 5 years. Recently, its commercial bank urged the company to consider increasing its permanent financing. Its bank loan under a line of credit has risen to $200,000, carrying a 8% interest rate. Howland has been 30 to 60 days late in paying trade creditors.

Discussions with an investment banker have resulted in the decision to raise $400,000 at this time. Investment bankers have assured the firm that the following alternatives are feasible (flotation costs will be ignored).

• Alternative 1: Sell common stock at $8.
• Alternative 2: Sell convertible bonds at a 8% coupon, convertible into 100 shares of common stock for each $1,000 bond (i.e., the conversion price is $10 per share).
• Alternative 3: Sell debentures at a 8% coupon, each $1,000 bond carrying 100 warrants to buy common stock at $10.

John L. Howland, the president, owns 80% of the common stock and wishes to maintain control of the company. There are 100,000 shares outstanding. The following are extracts of Howland's latest financial statements:

1. Show the new balance sheet under each alternative. For Alternatives 2 and 3, show the balance sheet after conversion of the bonds or exercise of the warrants. Assume that half of the funds raised will be used to pay off the bank loan and half to increase total assets.
2. Show Mr. Howland's control position under each alternative, assuming that he does not purchase additional shares. Round your answers to the nearest whole number, if necessary.
3. What is the effect on earnings per share of each alternative, assuming that profits before interest and taxes will be 20% of total assets? Round your answers to the nearest cent.
4. What will be the debt ratio (TL/TA) under each alternative? Round your answers to the nearest whole number, if necessary.

Hefty Inc. produces plastic storage containers. The company makes two sizes of containers: regular (55 gallon) and large (100 gallon). The company uses the same machinery to produce both sizes. The machinery can be run for only 2,500 hours per month. Hefty can produce 20 regular containers every hour, whereas it can only produce 8 large containers in the same amount of time. Fixed costs amount to $1,000,000 per month. Sales prices, variable costs, and monthly demand are as follows:

Total investment                                  $150,000,000

Required rate of return                                  10% per year

Consider each of the following INDEPENDENT scenarios:

1. To maximize profits, how many of each size container should Hefty produce per month? Prepare an income statement with this level of sales. What other strategies might Hefty consider (answer this question on the conclusion tab).
2. Assume the company makes only the regular product. Hefty is a price taker. The market price for the regular container recently dropped to $100 per container as there is a new low-cost online market entrant. Hefty needs to earn the necessary income to satisfy its financial stakeholders. How much does Hefty need to reduce costs to satisfy its required rate of return?

3. Hefty Inc. is deciding whether to outsource the production of a type of glue that is included in its containers. Hefty currently makes 10,000 bottles of glue with a variable cost of $.90 per bottle. If Hefty Inc. outsources, it can buy the glue ready-made for $1.20 per bottle and can shut down the production facilities it is currently using to manufacture the glue, which cost $12,000 per year. What is the effect of outsourcing? What other factors should Hefty consider?

1. The conclusion should be formatted as follows:

The Howland Carpet Company has grown rapidly during the past 5 years. Recently, its commercial bank urged the company to consider increasing its permanent financing. Its bank loan under a line of credit has risen to $250,000, carrying an 8% interest rate. Howland has been 30 to 60 days late in paying trade creditors. Discussions with an investment banker have resulted in the decision to raise $500,000 at this time. Investment bankers have assured the firm that the following alternatives are feasible (flotation costs will be ignored).

● Alternative 1: Sell common stock at $8.

● Alternative 2: Sell convertible bonds at an 8% coupon, convertible into 100 shares of common stock for each $1,000 bond (i.e., the conversion price is $10 per share).

● Alternative 3: Sell debentures at an 8% coupon, each $1,000 bond carrying 100 warrants to buy common stock at $10.

John L. Howland, the president, owns 80% of the common stock and wishes to maintain control of the company. There are 100,000 shares outstanding. The following are extracts of Howland’s latest financial statements:

Balance Sheet

Line of credit 250,000

Other current liabilities $150,000

Long-term debt 0

Common stock, par $1 100,000

Retained earnings 50,000

Total assets $550,000

Total claims $550,000

Income Statement

Sales $1,100,000

All costs except interest 990,000

EBIT $110,000

Interest 20,000

Pre-tax earnings $90,000

Taxes (40%) 36,000

Net income $54,000

Shares outstanding 100,000

Earnings per share $0.54

Price/earnings ratio 15.83

Market price of stock $8.55

a. Show the new balance sheet under each alternative. For Alternatives 2 and 3, show the balance sheet after conversion of the bonds or exercise of the warrants. Assume that half of the funds raised will be used to pay off the bank loan and half to increase total assets.

b. Show Mr. Howland’s control position under each alternative, assuming that he does not purchase additional shares.

c. What is the effect on earnings per share of each alternative, assuming that profits before interest and taxes will be 20% of total assets?

d. What will be the debt ratio (TL/TA) under each alternative?

e. Which of the three alternatives would you recommend to Howland, and why?

A realtor in Arlington, Massachusetts, is analyzing the relationship between the sale price of a home (Price in $), its square footage (Sqft), the number of bedrooms (Beds), and the number of bathrooms (Baths). She collects data on 36 sales in Arlington in the first quarter of 2009 for the analysis. A portion of the data is shown in the accompanying table.

a. Estimate the model Price =  β₀ + β₁Sqft + β₂Beds + β₃Baths + ε. (Round Coefficients to 2 decimal places.)

b-1. Interpret the coefficient of sqft.

• For every additional square foot, the predicted price of a home increases by $107.67.

• For every additional square foot, the predicted price of a home increases by $107.67, holding number of bedrooms and bathrooms constant.

• For every additional square foot, the predicted price of a home increases by $107.67, holding square foot, number of bedrooms and bathrooms constant.

b-2. Interpret the coefficient of beds.

• For every additional bedroom, the predicted price of a home increases by $13,699.54.

• For every additional bedroom, the predicted price of a home increases by $13,699.54, holding square footage and number of baths constant.

• For every additional bedroom, the predicted price of a home increases by $13,699.54, holding square foot, number of bedrooms and bathrooms constant.

b-3. Interpret the coefficient of baths.

• For every additional bathroom, the predicted price of a home increases by $82,074.78.

• For every additional bathroom, the predicted price of a home increases by $82,074.78, holding square footage and number of bedrooms constant.

• For every additional bathroom, the predicted price of a home increases by $82,074.78, holding square foot, number of bedrooms and bathrooms constant.

c. Predict the price of a 2,078 square-foot home with two bedrooms and one bathrooms. (Round coefficient estimates to at least 4 decimal places and final answer to the nearest whole number.)

price= $

A realtor in Arlington, Massachusetts, is analyzing the relationship between the sale price of a home (Price in $), its square footage (Sqft), the number of bedrooms (Beds), and the number of bathrooms (Baths). She collects data on 36 sales in Arlington in the first quarter of 2009 for the analysis. A portion of the data is shown in the accompanying table.

a. Estimate the model Price =  β₀ + β₁Sqft + β₂Beds + β₃Baths + ε. (Round Coefficients to 2 decimal places.)

b-1. Interpret the coefficient of sqft.

• For every additional square foot, the predicted price of a home increases by $107.67.

• For every additional square foot, the predicted price of a home increases by $107.67, holding number of bedrooms and bathrooms constant.

• For every additional square foot, the predicted price of a home increases by $107.67, holding square foot, number of bedrooms and bathrooms constant.

b-2. Interpret the coefficient of beds.

• For every additional bedroom, the predicted price of a home increases by $13,699.54.

• For every additional bedroom, the predicted price of a home increases by $13,699.54, holding square footage and number of baths constant.

• For every additional bedroom, the predicted price of a home increases by $13,699.54, holding square foot, number of bedrooms and bathrooms constant.

b-3. Interpret the coefficient of baths.

• For every additional bathroom, the predicted price of a home increases by $82,074.78.

• For every additional bathroom, the predicted price of a home increases by $82,074.78, holding square footage and number of bedrooms constant.

• For every additional bathroom, the predicted price of a home increases by $82,074.78, holding square foot, number of bedrooms and bathrooms constant.

c. Predict the price of a 2,078 square-foot home with two bedrooms and one bathrooms. (Round coefficient estimates to at least 4 decimal places and final answer to the nearest whole number.)

price= $

Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $87, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, a coupon of 10 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon of 11 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 7 years. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Equity/Value Debt/Value b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Equity/Value Debt/Value c. Which are more relevant, the book or market value weights? Market value/Book value

Problem 2: Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 25 Direct labor $ 18 Variable manufacturing overhead $ 3 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 320,000 Fixed selling and administrative expenses $ 90,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $54 per unit.

Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.  

3.        Variable and Absorption Costing

Follow the directions below and answer the following problem.

Maxwell Company manufactures and sells a single product. The following costs were incurred during 2014, the company’s first year of operations:

                    Variable Costs per Unit:

                              Production:

                                       Direct Materials                                            $16

                                       Direct Labor                                                     8

                                       Variable Manufacturing Overhead                  2

                              Selling and Administrative                                        4

                    Fixed Costs per Year:

                              Manufacturing Overhead                            $ 140,000

                              Selling and Administrative                             110,000

During 2014, the company produced 20,000 units and sold 18,000 units. The selling price of the company’s product is $50 per unit.

For Question A for both 1 & 2 answer below:

                                    Compute the Cost to Produce One Unit of Product

1.         Absorption Costing                                                     2.         Variable Costing

1B.       Income Statement – Absorption Costing

2B.       Income Statement – Variable Costing

I have the first 4 questions already answered I just need (Absorption Costing) (Variable Costing) (Income Statement – Absorption Costing) (2B Income Statement – Variable Costing)