Fin 534 fin management week 10 homework #5 dividends, capital

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

FIN 534 Week 10 Homework Set 5

[Pin It]

Use the following information for Questions 1 through 3:



Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. This one-time unusual earnings growth won’t be maintained, though, and after 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt ratio is 35%.



Calculate Boehm’s total dividends for 2014 under each of the following policies:



1. Its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings.



2. It continues the 2013 dividend payout ratio.



3. It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt).



4. It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy.

Use the following information for Questions 5 and 6:



Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm’s fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss



carryforwards that render its tax rate zero, its cost of equity is 16%, and it uses no debt.



5. What is the incremental profit? To get a rough idea of the project’s profitability, what is the project’s expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the investment? Why or why not?



6. Would the firm’s break-even point increase or decrease if it made the change?

Use the following information for Questions 7 and 8:



Suppose you are provided the following balance sheet information for two firms, Firm A and Firm B (in thousands of dollars).









Firm A


Firm B












Current assets





$150,000


$120,000












Fixed assets (net)





150,000


180,000












Total assets





$300,000


$300,000























Current liabilities





$20,000


$80,000












Long-term debt





80,000


20,000












Common stock





100,000


100,000












Retained earnings





100,000


100,000












Total liabilities and equity





$300,000


$300,000














Earnings before interest and taxes for both firms are $30 million, and the effective federal plus-state tax rate is 35%.



7. What is the return on equity for each firm if the interest rate on current liabilities is12% and the rate on long-term debt is 15%?



8. Assume that the short-term rate rises to 20%, that the rate on new long-term debt rises to 16%, and that the rate on existing long-term debt remains unchanged. What would be the return on equity for Firm A and Firm B under these conditions?



9. In 1983 the Japanese yen-U.S. dollar exchange rate was 250 yen per dollar, and the dollar cost of a compact Japanese-manufactured car was $10,000. Suppose that now the exchange rate is 120 yen per dollar. Assume there has been no inflation in the yen cost of an automobile so that all price changes are due to exchange rate changes. What would the dollar price of the car be now, assuming the car’s price changes only with exchange rates?

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Homework Writing Services
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
History
GOOD WORK.
Customer 463001, June 21st, 2022
Nursing
Awesome! Thanks
Customer 454007, June 19th, 2020
History
The work is of really good quality and was done on time.
Customer 454439, June 1st, 2020
SEO
Great
Customer 463647, April 28th, 2023
SEO
good job
Customer 463813, April 11th, 2023
Education
written to perfection. Thank you
Customer 463813, April 11th, 2023
Education
Thanks for your cooperation. Great work.
Customer 463647, December 16th, 2022
Business Studies
Excellent as always!
Customer 454647, June 26th, 2020
Education
yes I did
Customer 453969, February 11th, 2020
Military
Very good job
Customer 456821, May 11th, 2022
SEO
Nice work! it required minimal edits.
Customer 463647, April 14th, 2023
Business and administrative studies
Good work.
Customer 452615, May 9th, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat