Response:
The return on equity (ROE) would be altered by 8.52%
Clarification:
Initially, we determine the existing ROE utilizing the Dupont Formula, yielding ROE as follows:
ROE = Net Income/Sales * Sales/Total Assets * Total Assets/Equity
or
ROE = Net Profit Margin * Total Assets Turnover * Equity Multiplier
- Current ROE = 10600/295000 * 1.4 * 1.75 = 0.0880 or 8.8%
The condition states that net income might rise to 20850 while other factors remain unchanged. Therefore, to find the new ROE, we compute the updated Net Profit margin, keeping the total assets turnover and the equity multiplier constant due to the absence of sales, assets, or capital structure changes.
- New ROE = 20850/295000 * 1.4 * 1.75 = 0.17316 or 17.32%
- The ROE would have shifted by 17.32 - 8.80 = 8.52%
Answer: $36,000 loss
Explanation:
Initial cost = $250,000
Shipping fees = $3,500
Setup fees = $2,500
Annual maintenance = $5,000
Depreciation amount = $25,000
Proposed selling price = $200,000
Total costs involved = $(250,000 + 3,500 + 2,500 + 5,000)
Total costs involved = $261,000
Depreciation amount = $25,000
Equipment's book value = $261,000 - $25,000 = $236,000
Calculating gain/loss = Book value - selling price
Gain/loss = $236,000 - $200,000
$36,000 loss
Answer:
A. $880
B. -$752.23
Explanation:
To find the conversion value of the issue, we start with this calculation
The initial step is to compute the Conversion ratio using the following formula
Conversion ratio = Par value of security/ Conversion price
Substituting, we find
Conversion ratio = $1,000/$25
Thus, Conversion ratio = 40
Next, we determine the Conversion value with this formula
Conversion value = Conversion ratio * Conversion price
Substituting gives
Conversion value = 40*$22 per share
Therefore, the conversion value of the issue equals $880
B. Now calculating the Straight bond value of the issue
Using a financial calculator for Present Value (PV)
PMT = 8%*1,000 = 80
N = 12 years
1/Y = 12%
FV = 1,000
Thus, PV = -$752.23
This means the Straight bond value of the issue is -$752.23
Answer:
0.45
Explanation:
Total asset turnover indicates the ratio of total assets to total revenue. It evaluates how effectively a company is employing its assets to generate sales.
The calculation is performed as follows: Net Sales / Average Total Assets.
Average total assets are determined by: (Asset at Start + Asset at End) / 2.
Using the given data:
Total revenue = $900,000 and total assets = $2,000,000.
$900,000/$2,000,000 = 0.45.
Note: Since the beginning and ending assets are not specified, we assume $2,000,000 represents the average assets.
