Table 1: Alpine Chemical Company 20X1 20X2 20X3 20X4 20X5 20X6 EBIT/Interest expense 4.95 3.46 4.96 4.79 4.70 ? Long-term debt/Total capitalization Funds from operations/Total debt 44% 28% 34% 34% 34% ? 54% 84% 93% 56% 51% ? Operating income/Sales 13% 13% 13% 14% 12% ? Table 2: Industry Data Three-Year Medians (20X4-20X6) by Credit-Rating Category AAA AA A BBB BB EBIT/Interest expense 11.0 9.5 4.5 3.0 2.0 B 1.0 Long-term debt/Total capitalization 13.0 16.5 29.5 39.0 45.5 63.5 Funds from operations/Total debt 83.0 74.0 45.5 31.5 18.5 8.0 Operating income/Sales 21.5 16.0 15.0 12.0 11.0 9.0 Complete this question by entering your answers in the tabs below. Required 1 Required 3 Using the data provided in the accompanying financial statements, calculate the following ratios for Alpine Chemical for 20X6: a. EBIT/Interest expense (Round your answer to two decimal places.) b. Long-term debt/Total capitalization at December 31 (Round percentage answer to the nearest whole percent.) c. Funds from operations/Total debt (Round percentage answer to the nearest whole percent.) d. Operating income/Sales (Round percentage answer to the nearest whole percent.) a. EBIT/Interest expense b. Long-term debt/Total capitalization at December 31 % c. Funds from operations/Total debt % d. Operating income/Sales % Show less A Required 1 Required 3 Insert your answers to requirement 1 into Table 1 that follows. Then from Table 2, select an appropriate credit rating for Alpine Chemical. (Round percentage answers to nearest whole percent. Round "EBIT/Interest Expense" answer to two decimal places.) Alpine Chemical Company 20X1 20X2 20X3 20X4 20X5 20X6 Credit Rating EBIT/Interest expense 4.95 3.46 4.96 4.79 4.70 Long-term debt/Total capitalization 44 % 28% 34% 34% 34 % Funds from operations/Total debt 54% 84% 93% 56 % 51% Operating income/Sales 13% 13 % 13 % 14 % 12 %
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Breanna O.
ZZZ company has $27 million of current assets and $29 million of noncurrent assets. It forecasts an EBIT of $5.2 million and pays income taxes at a 35% rate. Short-term bank notes carry a 4% interest rate, and the company can issue long-term bonds at 7%. The company has set a target debt ratio of 45%. Required: A. For a maturity mix of 60% current and 40% long-term debt, prepare the company's abbreviated balance sheet. B. For a maturity mix of 60% current and 40% long-term debt, prepare the company's financial half of its income statement. C. Based on the financial statements above, calculate the return on equity ratio in order to evaluate the company's risk and return. D. Based on the financial statements above, calculate the current ratio in order to evaluate the company's risk and return.
Akash M.
E12.1. Leveraging Equations (Easy) The following information is from reformulated financial statements (in millions): 2012 2011 Operating assets $2,700 $2,000 Short-term debt securities $100 $400 Operating liabilities ($300) ($100) Bonds payable ($1,300) ($1,400) Book value $1,200 $900 Sales $2,100 Operating expenses ($1,677) Interest revenue $27 Interest expense ($137) Tax expense (tax rate = 34%) ($106) Earnings (net) $207 a. (1) Calculate the dividends, net of capital contributions, for 2012. (2) Calculate ROCE for 2012; use average book value in the denominator. (3) Calculate RNOA for 2012; use the average net operating assets in the denominator. (4) Supply the numbers for the formula ROCE = PM × ATO + [Financial leverage × (RNOA − Borrowing cost)] b. The firm's short-term borrowing rate is 4.5 percent after tax. Supply the numbers for the formula RNOA = ROOA + (OLLEV × OLSPREAD) c. Repeat the exercise in part (a) using the following information (in millions): 2012 2011 Operating assets $2,700 $2,000 Short-term debt securities $1,000 $800 Operating liabilities ($300) ($100) Book value $3,400 $2,700 Sales $2,100 Operating expenses ($1,677) Interest revenue $90 Tax expense (tax rate = 34%) ($174) Earnings $339
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