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Financial Management
Summaries, Notes8 Computers, Consumer Electronics, Economics, Accounting
Problem 14:
Suppose the cost of equity of the company is 16%. If the company has a capital structure of 50% debt and 50% equity, a before-tax cost of debt of 5%, and a marginal tax rate of 20%, what is its weighted average cost of capital?
0.5*0.05*(1-0.2)+0.5*0.16= 8,02
Problem 15:
XYZ Company sells a product at a price of €4.00 per unit. The product’s variable cost per unit is €2.00. The product has fixed cost of €10,000. What is the company’s breakeven point, in units?
10000/(4-2) = 5000 units
Problem 16:
The company sells 10,000 units at a price of €5 per unit. The company’s fixed costs are €8,000, interest expense is €2,000, variable costs are €3 per unit, and EBIT is €12,000. Estimate the company’s degree of operating leverage (DOL), degree of financial leverage (DFL) and total leverage (DTL). Interpret your results.
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Financial Management: Homework Name: Surname: Group: Problem 1: Use the company’s financial data to answer the questions. Vortex IT Company: Balance Sheet as of December 31, 2017 (In Thousands) Cash $77,500 Accounts payable $129,000 Receivables 336,000 Notes payable 84,000 Inventories 241,500 Other current liabilities 117,000 Total current assets 655,000 Total current liabilities 330,000 Net fixed assets 292,500 Long-term debt 256,500 Common equity 361,000 Total assets $947,500 Total liabilities and equity 947,500 Vortex IT Company: Profit and Loss Account for year ended December 31, 2017 (in Thousands) Sales $1,607,500 Costs of goods sold 1,392,500 Selling, general, and administrative expenses 145,000 Earnings before interest and taxes (EBIT) $70,000 Interest expense 24,500 Earnings before taxes (EBT) $45,500 Taxes (40%) 18,200 Net Income $27,300 a) Calculate the indicated financial ratios for Vortex IT Company and complete the table:
