You are considering a stock investment in one of two firms (AllDebt, Incorporated, and AllEquity, Incorporated), both of which operate in the same industry and have identical EBITDA of $15.6 million and operating income of $8.0 million. AllDebt, Incorporated, finances its $60 million in assets with $59 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Incorporated, finances its $60 million in assets with no debt and $60 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the income available to pay the asset funders (the debt holders and stockholders) and resulting return on asset-funders' investment for the two firms. Note: Enter your dollar answers in millions of dollars. Round all answers to 3 decimal places. Income available for asset funders Return on asset-funders' investment AllDebt million % $ AllEquity 6.320 million 10.533 %

You are considering a stock investment in one of two firms (AllDebt, Incorporated, and AllEquity, Incorporated), both of which operate in the same industry and have identical EBITDA of $15.6 million and operating income of $8.0 million. AllDebt, Incorporated, finances its $60 million in assets with $59 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Incorporated, finances its $60 million in assets with no debt and $60 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the income available to pay the asset funders (the debt holders and stockholders) and resulting return on asset-funders' investment for the two firms. Note: Enter your dollar answers in millions of dollars. Round all answers to 3 decimal places. Income available for asset funders Return on asset-funders' investment AllDebt million % $ AllEquity 6.320 million 10.533 %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $38.5 million and operating income of $24.5 million. NoEquity, Inc., finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70 million in assets with no debt and $70 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) es Net income Return on assets NoEquity NoDebt million % million %
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $39.5 million and operating income of $14.5 million. NoEquity, Inc., finances its $50 million in assets with $49 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $50 million in assets with no debt and $50 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets—funders’ investments—for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) NoEquity. NoDebt Net income million million Return on assets % %
You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical EBITDA of $15.5 million and operating income of $8.5 million. AllDebt, Inc., finances its $55 million in assets with $54 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Inc., finances its $55 million in assets with no debt and $55 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the income available to pay the asset—funders’ investment—(the debt holders and stockholders) and resulting return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 3 decimal places.) AllDebt AllEquity Income available for asset funders million million Return on asset-funders' investment % %
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $39.4 million and operating income of $15.5 million. NoEquity, Inc., finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70 million in assets with no debt and $70 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) Answer is not complete. NoEquity Net income $ 0.000 million Return on assets % NoDebt million %
You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $37.7 million and operating income of $32.5 million. NoEquity, Incorporated, finances its $65 million in assets with $64 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $65 million in assets with no debt and $65 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments for the two firms.
You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $38.0 million and operating income of $29.5 million. NoEquity, Incorporated, finances its $40 million in assets with $39 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $40 million in assets with no debt and $40 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. Note: Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places. Answer is complete but not entirely correct. Net income Return on asset-funders' investment $ NoEquity 20.224 50.56 million $ % NoDebt 23.305 58.26 million %
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc), both of which operate in the same industry and have identical operating income of $25,5 million. NoEquity, Inc., finances its $50 million in assets with $49 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc. finances its $50 million in assets with no debt and $50 million in equity Both firms pay a tax rate of 30 percent on their taxable income Calculate the net income and return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.) NoEquity m NoDebt $0 Net income Return on assets
You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $37.7 million and operating income of $32.5 million. NoEquity, Incorporated, finances its $65 million in assets with $64 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $65 million in assets with no debt and $65 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. Note: Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places. Net income Return on asset-funders' investment NoEquity million % 4
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $32.5 million. NoEquity, Inc., finances its $65 million in assets with $64 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $65 million in assets with no debt and $65 million in equity. Both firms pay a tax rate of 30 percent on their taxable income. Calculate the net income and return on assets for the two firms. Return on assets = net income / total assets Accounting equation: total assets = total liabilities debt + total equity
You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $32.50 million in assets with $30.25 million in debt and $2.25 million in equity. LotsofEquity, Inc. finances its $32.50 million in assets with $2.25 million in debt and $30.25 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) Calculate the equity multiplier. (Round your answers to 2 decimal places.) Calculate the debt-to-equity. (Round your answers to 2 decimal places.)
You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $36.00 million in assets with $33.00 million in debt and $3.00 million in equity. LotsofEquity, Inc. finances its $36.00 million in assets with $3.00 million in debt and $33.00 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) LotsofDebt, Inc. = ___.__% LotsofEquity, Inc. = ___.__% Calculate the equity multiplier. (Round your answers to 2 decimal places.) LotsofDebt, Inc. =______ times LotsofEquity, Inc. = ______ times Calculate the debt-to-equity. (Round your answers to 2 decimal places.) LotsofDebt, Inc. =______ times LotsofEquity, Inc. = ______ times
You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $38.00 million in assets with $33.75 million in debt and $4.25 million in equity. LotsofEquity, Inc. finances its $38.00 million in assets with $4.25 million in debt and $33.75 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) debt ratio Lotsofdebt Inc: % Lotsofequity Inc: % Calculate the equity multiplier. (Round your answers to 2 decimal places.) Equity Multiplier Lotsofdebt Inc: Timess Lotsodequity Inc: Times Calculate the debt-to-equity. (Round your answers…

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