.(#2 Form B) Capital structureAnswer: a Diff: E N
.(#3 Form B) Capital structure, ROA, and ROEAnswer: d Diff: E N
Statements a and b are represent; therefore, statement d is the appropriate choice. ROA = NI/TA. If total assets stop the same, but NI decreases (because of the new interest payment), ROA will decrease. NI will fall, but not as much in comparison to the amount that common equity will fall, therefore ROE = NI/CE will rise. BEP will uphold the same. BEP = EBIT/TA, where TA and EBIT remain the same.
.(#4 Form B) Optimal capital structureAnswer: d Diff: M
.(#5 Form B) star sign theory predictionsAnswer: b Diff: M
.(#6 Form B) determine bellAnswer: e Diff: E
EBIT = PQ - VQ - FC
$95,000 = P(55,000) - (0.4)P(55,000) - $110,000
$205,000 = (0.6)(55,000)P
$205,000 = 33,000P
P = $6.21.
.(#7 Form B) Breakeven bellAnswer: a Diff: E
Total costs = $10,000 + $2(42,000) = $94,000.
toll = $94,000/42,000 = $2.24.
.(#8 Form B) in the raw financingAnswer: a Diff: M
Old debt ratio = 0.3333; New debt ratio = 0.1667.
= 7.5.
TA = = $100,000.
Debt = 0.3333($100,000) = $33,330.
New TA = $100,000 + $100,000 = $200,000.
New Debt = $200,000(0.1667) = $33,340.
Altmans current debt of $33,330 represents approximately 16.67% of total assets chase the expansion, thus the firm should finance with 100 percent equity.
.(#9 Form B) Change in breakeven raftAnswer: b Diff: M
Calculate the old and new breakeven volumes using the old info and new projections:
Old QBE = $120,000/($1.20 - $0.60) = $120,000/$0.60 = 200,000 units.
New QBE = $240,000/($1.05 - $0.41) = $240,000/$0.64 = 375,000 units.
Change in breakeven volume = 375,000 - 200,000 = 175,000 units.
.(#10 Form B) Capital structure and stock priceAnswer: b Diff: T N
First, calculate the stock price for each debt level using the dividend growth model, P0 = D1/(kS - g).
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