Complete this question by entering your answers in the tabs below. Req 1 and 2 Req...

Transcribed Image Text:

Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 For Industry H, Frenza is planning a $400,000 expansion to launch a new product line. Frenza currently earns $250,000 in net income, and the new product line will yield $125,000 in additional income before any interest expense. Frenza has three options: (1) do not expand, (2) expand and issue $400,000 in debt that requires payments of 8% annual interest, or (3) expand and raise $400,000 from equity financing. For each option 1, 2, and 3, compute (a) net income and (b) return on equity (Net income Equity). Ignore any income tax effects. (Round "Return on equity" to 1 decimal place.) Important! Be sure to click the correct Industry at the top of the dashboard. 1 2 3 Industry Don't Expand Debt Financing Equity Financing Income before interest expense H Interest expense H Net income H Equity Return on equity H H % % Show less Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 Frenza: January 1, Year 1 Carrying Value: $220,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 1 Year 2 Year 3 Select Industry _A_ B Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 January 1, Ye 1 Frenza: January 1, Year 1 Unamortized Discount: $30,000 Cash & Inver Carrying Value Unamortized Discount une 30, Year 2 December 31, June 30, Year 3 December 31, Year 3 Year 2 Market Rate for Company Bonds Select Industry _A_ B Carr Frenza Bond Amortization Una $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Frenza: June 30, Year 1 Carrying Value: $225,000 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 > B Select Industry $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 _E_ _F_ Frenza Bond Amortization Carrying Value Unamortized Discount $0 January 1, Year June 30, Y 1 Frenza: June 30, Year 1 Unamortized Discount: $25,000 Cash & Inventory for Companies 2 December 31, June 30, Year 3 December 31, Year 2 Year 3 ket Rate for Company Bonds Select Industry __A__ B _C_ $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 _E_ F Frenza Bond Amortization Frenza: December 31, Year 1 Carrying Value: $230,000 _H_ Carrying Value Unamortized Discount January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 1 Year 3 Year 2 Select Industry E Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount Yeai Frenza: December 31, Year 1 Unamortized Discount: $20,000 31, June 30, Year 3 December 31, Year 3 January 1, Year June 30, Year 1 Decemb 1 Cash & Inventory for Competir Companies 10% Jor Company Bonds The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry _A_ B _C_ _D_ __E__ __F_ G _H_ Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Frenza: June 30, Year 2 Carrying Value: $235,000 Carrying Value Unamortized Discount January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 3 Year 1 Year 2 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual con rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finan growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations Select Industry - > _A_ $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 B E Frenza Bond Amortization III January 1, Year June 30, Year 1 December 31, June 30, Year 1 Year 1 Cash & Inventory for Competing Carrying Value Unamortized Discount December 31, Frenza: June 30, Year 2 Year 3 Unamortized Discount: $15,000 Ma Bonds The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry __A____ B C G Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount Frenza: December 31, Year 2 Carrying Value: $240,000 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, Year 3 1 Year 1 Year 2 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry - _A_ B $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 E G _H_ Frenza Bond Amortization January 1, Year June 30, Year 1 December 31, June 30, Year 2 December Year 1 Year 2 1 Cash & Inventory for Competing Market Rate Carrying Value Unamortized Discount V ---. Frenza: December 31, Year 2 Unamortized Discount: $10,000 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry _A_ B _E_ _F_ _G_ _H_ Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount Frenza: June 30, Year 3 Carrying Value: $245,000 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 1 Year 2 Year 3 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry __A____ B _C_ Frenza Bond Amortization Carrying Value Unamortized Discount $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 1 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31 Year 1 Year 2 Cash & Inventory for Competing Market Rate fo June 20 Vanu 2 Decembru 21 Frenza: June 30, Year 3 Unamortized Discount: $5,000 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry _A_ B $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 E Frenza Bond Amortization _H_ January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, Year 2 1 Year 1 Carrying Value Unamortized Discount Frenza: December 31, Year 3 Carrying Value: $250,000 1 Cash & Inventory for Competing Companies Frenza $120,000 $90,000 Frenza Cash: $137,500 $60,000 $30,000 $0 Cash Inventory Cash Inventory Cash Inventory Lika Nelo Year 1 Cash & Inventory for Competing Companies Frenza $120,000 $90,000 $60,000 $30,000 $0 Cash Inventory Frenza Inventory: $75,000 Inver Lika Nelo Inventory Frenza $120,000 $90,000 $60,000 $30,000 $0 Cash Inventory Cash Inventor Cash & Inventory for Competing Companies Lika Cash: $80,000 Cas Inventory Lika Nelo Cash & Inventory for Competing Companies Frenza $120,000 $90,000 $60,000 $30,000 $0 Cash Inventory Cash Inventory 10% Lika Nelo 8% Lika Inventory: $105,000 Invent Net Inc Total E 6% 4% 2% 0% $90,000 $60,000 Cash & Inventory for Competing Companies Marke 10% Fre Frenza $120,000 Lika Nelo 8% 6% $30,000 $0 #+ableau Cash Inventory Cash Inventory Cash Nelo 4% 2% 0% ota Cash: $45,000 Inve Net Income Total Equity 1 Cash & Inventory for Competing Year 1 Companies 10% Frenza Frenza Lika Nelo 8% $120,000 6% $90,000 $60,000 $30,000 $0 +ableau Cash Inventory Cash Inventory Cash Inventory 2% 0% 4% Year 2 Market Rate 1 Total Equit Nelo enza Inventory: $17,500 0,000 Total Equity $1,000,000 Market Rate for Company Bonds 10% Frenza 8% 6% 4% 2% Frenza Market Rate for Bonds: 9% 0% Total Equity & Net Income Nelo Frenza Lika Nelo Net Income $250,000 $475,000 $212,500 Total Equity $1,000,000 $1,325,000 $687,500 10% 8% 6% 4% 2% 0% Market Rate for Company Bonds Frenza Lika Lika Market Rate for Bonds: 7% Total Equity & Net Income Frenza Lika Nelo Net Income $250,000 $475,000 $212,500 Total Equity $1,000,000 $1,325,000 $687,500 Market Rate for Company Bonds Frenza 10% 8% 6% 4% 2% 0% Lika Nelo Nelo Market Rate for Bonds: 4% Total Equity & Net Income Frenza Lika Nelo Net Income $250,000 $475,000 $212,500 Total Equity $1,000,000 $1,325,000 $687,500 L Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 For Industry H, Frenza is planning a $400,000 expansion to launch a new product line. Frenza currently earns $250,000 in net income, and the new product line will yield $125,000 in additional income before any interest expense. Frenza has three options: (1) do not expand, (2) expand and issue $400,000 in debt that requires payments of 8% annual interest, or (3) expand and raise $400,000 from equity financing. For each option 1, 2, and 3, compute (a) net income and (b) return on equity (Net income Equity). Ignore any income tax effects. (Round "Return on equity" to 1 decimal place.) Important! Be sure to click the correct Industry at the top of the dashboard. 1 2 3 Industry Don't Expand Debt Financing Equity Financing Income before interest expense H Interest expense H Net income H Equity Return on equity H H % % Show less Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 Frenza: January 1, Year 1 Carrying Value: $220,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 1 Year 2 Year 3 Select Industry _A_ B Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 January 1, Ye 1 Frenza: January 1, Year 1 Unamortized Discount: $30,000 Cash & Inver Carrying Value Unamortized Discount une 30, Year 2 December 31, June 30, Year 3 December 31, Year 3 Year 2 Market Rate for Company Bonds Select Industry _A_ B Carr Frenza Bond Amortization Una $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Frenza: June 30, Year 1 Carrying Value: $225,000 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 > B Select Industry $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 _E_ _F_ Frenza Bond Amortization Carrying Value Unamortized Discount $0 January 1, Year June 30, Y 1 Frenza: June 30, Year 1 Unamortized Discount: $25,000 Cash & Inventory for Companies 2 December 31, June 30, Year 3 December 31, Year 2 Year 3 ket Rate for Company Bonds Select Industry __A__ B _C_ $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 _E_ F Frenza Bond Amortization Frenza: December 31, Year 1 Carrying Value: $230,000 _H_ Carrying Value Unamortized Discount January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 1 Year 3 Year 2 Select Industry E Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount Yeai Frenza: December 31, Year 1 Unamortized Discount: $20,000 31, June 30, Year 3 December 31, Year 3 January 1, Year June 30, Year 1 Decemb 1 Cash & Inventory for Competir Companies 10% Jor Company Bonds The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry _A_ B _C_ _D_ __E__ __F_ G _H_ Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Frenza: June 30, Year 2 Carrying Value: $235,000 Carrying Value Unamortized Discount January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 3 Year 1 Year 2 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual con rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finan growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations Select Industry - > _A_ $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 B E Frenza Bond Amortization III January 1, Year June 30, Year 1 December 31, June 30, Year 1 Year 1 Cash & Inventory for Competing Carrying Value Unamortized Discount December 31, Frenza: June 30, Year 2 Year 3 Unamortized Discount: $15,000 Ma Bonds The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry __A____ B C G Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount Frenza: December 31, Year 2 Carrying Value: $240,000 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, Year 3 1 Year 1 Year 2 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry - _A_ B $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 E G _H_ Frenza Bond Amortization January 1, Year June 30, Year 1 December 31, June 30, Year 2 December Year 1 Year 2 1 Cash & Inventory for Competing Market Rate Carrying Value Unamortized Discount V ---. Frenza: December 31, Year 2 Unamortized Discount: $10,000 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry _A_ B _E_ _F_ _G_ _H_ Frenza Bond Amortization $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 Carrying Value Unamortized Discount Frenza: June 30, Year 3 Carrying Value: $245,000 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, 1 Year 1 Year 2 Year 3 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry __A____ B _C_ Frenza Bond Amortization Carrying Value Unamortized Discount $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 1 January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31 Year 1 Year 2 Cash & Inventory for Competing Market Rate fo June 20 Vanu 2 Decembru 21 Frenza: June 30, Year 3 Unamortized Discount: $5,000 The founder of Frenza asks us to assist her in the accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations. Select Industry _A_ B $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $0 E Frenza Bond Amortization _H_ January 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, Year 2 1 Year 1 Carrying Value Unamortized Discount Frenza: December 31, Year 3 Carrying Value: $250,000 1 Cash & Inventory for Competing Companies Frenza $120,000 $90,000 Frenza Cash: $137,500 $60,000 $30,000 $0 Cash Inventory Cash Inventory Cash Inventory Lika Nelo Year 1 Cash & Inventory for Competing Companies Frenza $120,000 $90,000 $60,000 $30,000 $0 Cash Inventory Frenza Inventory: $75,000 Inver Lika Nelo Inventory Frenza $120,000 $90,000 $60,000 $30,000 $0 Cash Inventory Cash Inventor Cash & Inventory for Competing Companies Lika Cash: $80,000 Cas Inventory Lika Nelo Cash & Inventory for Competing Companies Frenza $120,000 $90,000 $60,000 $30,000 $0 Cash Inventory Cash Inventory 10% Lika Nelo 8% Lika Inventory: $105,000 Invent Net Inc Total E 6% 4% 2% 0% $90,000 $60,000 Cash & Inventory for Competing Companies Marke 10% Fre Frenza $120,000 Lika Nelo 8% 6% $30,000 $0 #+ableau Cash Inventory Cash Inventory Cash Nelo 4% 2% 0% ota Cash: $45,000 Inve Net Income Total Equity 1 Cash & Inventory for Competing Year 1 Companies 10% Frenza Frenza Lika Nelo 8% $120,000 6% $90,000 $60,000 $30,000 $0 +ableau Cash Inventory Cash Inventory Cash Inventory 2% 0% 4% Year 2 Market Rate 1 Total Equit Nelo enza Inventory: $17,500 0,000 Total Equity $1,000,000 Market Rate for Company Bonds 10% Frenza 8% 6% 4% 2% Frenza Market Rate for Bonds: 9% 0% Total Equity & Net Income Nelo Frenza Lika Nelo Net Income $250,000 $475,000 $212,500 Total Equity $1,000,000 $1,325,000 $687,500 10% 8% 6% 4% 2% 0% Market Rate for Company Bonds Frenza Lika Lika Market Rate for Bonds: 7% Total Equity & Net Income Frenza Lika Nelo Net Income $250,000 $475,000 $212,500 Total Equity $1,000,000 $1,325,000 $687,500 Market Rate for Company Bonds Frenza 10% 8% 6% 4% 2% 0% Lika Nelo Nelo Market Rate for Bonds: 4% Total Equity & Net Income Frenza Lika Nelo Net Income $250,000 $475,000 $212,500 Total Equity $1,000,000 $1,325,000 $687,500 L