2023年公司财务管理题库

PARTIVOgdenOpticalCompanyhasestimatedthefollowingcostsofdebtandequitycapital(withbankruptcyandagencycosts)forvariousproportionsofdebtinitscapitalstructure:ProportionofDebt(B/B+E)CostofDebt,kiCostofEquity,ke0.0000.400.500.600.70-4.0%10.0%10.110.310.811.412.514.518.0Determinethefirm’soptimalstructure.Twofirms,NoLeverage,Inc.andHighLeverage,Inc.,haveequallevelsofoperatingriskanddifferonlyintheircapitalstructure.NoLeverageisunleveredandHighLeveragehas$500,000ofperpetualdebtinitscapitalstructure.Assumethattheperpetualannualincomeofbothfirmsavailableforstockholdersispaidoutasdividends.Hence,thegrowthrateforbothfirmsiszero.Theincometaxrateforbothfirmsis40percent.Assumethattherearenofinancialdistresscostsoragencycosts.Giventhefollowingdata:NoLeverage,Inc.HighLeverage,Inc.EquityincapitalstructureCostofequity,keDebtincapitalstructurePretaxcostofdebt,kdNetoperatingincome(EBIT)$1,000,00010%--$100,000$500,00013%$500,0007%$100,000DeterminethemarketvalueofNoLeverage,Inc.DeterminethemarketvalueofHighLeverage,Inc.PresentvalueofthetaxshieldtoHighLeverage,Inc.McGeeCorporationhasfixedoperatingcostsof$10millionandavariablecostratioof0.65.Thefirmhasa$20million,10percentbankloananda$6million,12percentbondissueoutstanding.Thefirmhas1millionsharesof$5(dividend)preferredstockand2millionsharesofcommonstock($1par).McGee’smarginaltaxrateis40percent.Salesareexpectedtobe$80million.a.ComputeMcGee’sdegreeofoperatingleverageatan$80millionsaleslevel.b.ComputeMcGee’sdegreeoffinancialleverageatan$80millionsaleslevel.c.Ifsalesdeclineto$70million,forecastMcGee’searningspershare.Connely,Inc.expectssalesofsiliconchipstobe$30millionthisyear.Becausethisisaverycapital-intensivebusiness,fixedoperatingcostsare$10million.Thevariablecostratiois40percent.Thefirm’sdebtobligationsconsistofa$2million,10percentbankloananda$10millionbondissuewitha12percentcouponrate.Theformhas100,000sharesofpreferredstockoutstandingthatpaysa$9.60dividend.Connelyhas1millionsharesofcommonstockoutstandinganditsmarginaltaxrateis40percent.ComputeConnely’sdegreeofoperatingleverage.ComputeConnely’sdegreeoffinancialleverage.ComputeConnely’sdegreeofcombinedleverage.ComputeConnely’sEPSifsalesdeclineby5percent.EmcoProductshasapresentcapitalstructureconsistingonlyofcommonstock(10millionshares).Thecompanyisplanningamajorexpansion,Atthistime,thecompanyisundecidedbetweenthefollowingtwofinancingplans(assumea40percentmarginaltaxrate):Plan1:Equityfinancing.Underthisplan,anadditional5millionsharesofcommonstickwillbesoleat$10each.Plan2:Debtfinancing.Underthisplan,%50millionof10percentlong-termdebtwillbesold.OnepieceofinformationthecompanydesiresforitsdecisionanalysisisanEBIT-EPSanalysis.CalculatetheEBIT-EPSindifferencepoint.GraphicallydeterminetheEBIT-EPSindifferencepoint.Hint:UseEBIT=$10millionand$25million.Whathappenstotheindifferencepointiftheinterestrateondebtincreasesandthecommonstocksalespriceremainsconstant?Whathappenstotheindifferencepointiftheinterestrateondebtremainsconstantandthecommonstocksalespriceincreases?MortonIndustriesisconsideringopeninganewsubsidiaryinBoston,tobeoperatedasaseparatecompany.Thecompany’sfinancialanalystsexpectthenewfacility’saverageEBITleveltobe$6millionperyear.Atthistime,thecompanyisconsideringthefollowingtwofinancingplans(usea40percentmarginaltaxrateinyouranalysis):Plan1:Equityfinancing,Underthisplan,2millioncommonshareswillbesoldat$10each.Plan2:Debt-equityfinancing.Underthisplan,$10millionof12percentlong-termdebtand1millioncommonsharesat$10eachwillbesold.CalculatetheEBIT-EPSindifferencepoint.CalculatetheexpectedEPSforbothfinancingplans.Whatfactorsshouldthecompanyconsiderindecidingwhichfinancingplantoadopt?Whichplandoyourecommendthecompanyadopt?MyersImplementsisattemptingtodevelopandmarketanewgardentractor.Fixedcoststodevelopandproducethenewtractorareestimatedtobe$10,000,000peryear.Thevariablecosttomakeeachtractorhasbeenestimatedat$2,000.Themarketingresearchdepartmenthasrecommendedapriceof$4,000pertractor.Whatisthebreakevenlevelofoutputforthenewtractor?Ifmanagementexpectstogenerateatargetprofitof$2,000,000fromthetractoreachyear,howmanytractorsmustbesold?TheSweetTimesCandyCompanyhasthefollowingequityaccountsonitsbalancesheet:Commonstock($1par,500,000shares)$500,000Contributedcapitalinexcessofpar2,000,000Retainedearnings13,000,000-----------------------Totalcommonstockholders’equity$15,500,000Thecurrentmarketpriceofthefirm’sshareis$50.Ifthefirmdeclaresa10percentstockdividend,whatwillbetheimpactonthefirm’sequityaccounts?Ifthefirmcurrentlypaysnocashdividend,whatistheimpactofa10percentstockdividendonthewealthpositionofthefirm’existingstockholders?Ifthefirmcurrentlypaysacashdividendof$1pershareandthisper-sharedividendratedoesnotchangeafterthe10percentstockdividend,whatimpactwouldyouexpectthestockdividendtohaveonthewealthpositionofexistingshareholders?TheEmcoSteelCompanyhasexperiencedaslow(3percentperyear)butsteadyincreaseinearningspershare.Thefirmconsistentlyhaspaidoutanaverageof75percentofeachyear’searningsasdividends.ThestockmarketevaluatesEmcoprimarilyonthebasisofitsdividendpayout,becausegrowthprospectsaremodest.Emco’smanagementpresentsaproposaltotheboardofdirectorsthatwouldrequiretheoutlayof$50milliontobuildanewplantintherapidlyexpandingFloridamarket.Theexpectedannualreturnontheinvestmentinthisplantisestimatedtobeinexcessof30percent,morethantwicethecurrentcompanyaverage.Tofinancethisinvestment,anumberofalternativesareb