Question: (A, B, and C) You have been given the attached information on the Crum Company. Crum expects sales to grow by 20 percent in the

(A, B, and C) You have been given the attached information on the Crum Company. Crum expects sales to grow by 20 percent in the next year and operating costs should increase in proportion to sales. Fixed assets were being operated at 75 percent of capacity in the most recent year, but all other assets were used to full capacity. The company plans to finance any external funds needed as 40 percent long-term debts and 60 percent common stock. The interest rate is 9 percent. The dividend payout ratio will remain constant.

Most Next Years Next Year

Recent Year Forecast After AFN

Sales $2,000.00

Operating costs 1,600.00

EBIT $ 400.00

Interest 40.00

EBT $ 360.00

Taxes (40%) 144.00

Net Income $216.00

Dividends (40%) 86.40

Addition to R.E. $ 129.60

Current Assets $ 600.00

Net fixed Assets 400.00

Total assets $1,000.00

A/P and Accruals $ 150.00

N/P 100.00

Long-term debts 200.00

Common stock 150.00

Retained earnings 400.00

Total Liab. & Equity $1,000.00

A) What is Crum's projected interest?

B & C) next questions.

What is Crum's projected ROE using the percentage of sales method?

Select one:

a. $270

b. $90

c. $180

d. $52

e. $240

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

The ledger of Wildhorse Company contains the following balances: Owner's Capital $28,600, Owner's Drawings $2,700, Service Revenue $50,000, Salaries and Wages Expense $27,100, and Supplies Expense...

Ch 12-11: Percentage of sales method and ROE You have been given the attached information on the Crum Company. Crum expects sales to grow by 50 percent in 2014 and operating costs should increase in...

You have been given the attached information on the Crum Company. Crum expects sales to grow by 30 percent in the next year and operating costs should increase in proportion to sales. Fixed assets...

You have been given the attached information on the Crum Company. Crum expects sales to grow by 50 percent in 2014 and operating costs should increase in proportion to sales. Fixed assets were being...

Please show me how to solve this step by step without the help of excel. Thank you! Question 2. (20 points) You have been given the attached information on the ABC Company. ABC expects sales to grow...

You have been given the attached information on the ABC Company. ABC expects sales to grow by 40 percent in 2015 and operating costs should increase in proportion to sales. Fixed assets were being...

You have been given the following information on the Crum Company. Crum expects sales to grow by 30 percent in the next year and operating costs should increase in proportion to sales. Fixed assets...

You have been given the following information on the Crum Company. Crum expects sales to grow by 40 percent in the next year and operating costs should increase in proportion to sales. Fixed assets...

Question 2. (20 points) You have been given the attached information on the ABC Company. ABC expects sales to grow by 30 percent in 2019 and operating costs should increase in proportion to sales....

Tou have been given the attached information on the ABC Company. ABC expects sales to grow by su percent in 2019 and operating costs should increase in proportion to sales. Fixed assets were being...

What is meant by the terms nominal and real rigidities? If nominal rigidities could be completely removed from the U.S. economy, would that solve the problem of output and employment fluctuations...

(5) Let f: C C be a smooth function. Show that f (2)dz is closed if an only if f is holomorphic.

An alloy consists of three metals, X, Y and Z. If X / Y = 8/15 and Y / Z = 21/32 find X: Z.

2. Let f : [0, 1] R be given by f(x) = x and g : R [0, 1] be given by g(x) = Theorem and provide an explicit description of the bijection constructed by the proof of the theorem. : Prove that |[0,...

Let f : (0, 1] R be given by f(r) = r and g : R [0, 1] be given by g(x) = 1 Prove that |[0, 1]= R| using the Cantor-Schrder-Bernstein Theorem and provide an explicit description of the bijection...

Consider the straightforward algorithm for computing S(1, r2, r3) = V#1 1+2 2+13 *3. Estimate the relative error when computing S(r1, 2, r3) in fl-arithmetic with the unit round-off u. Use the...

Explain MECHANICAL ENGINEERING DESIGN 1. Introduction to mechanical design 2. Background about mechanical design and its applications regarding renewable energy 3. Projects description + drawings +...

You have recently taken over the role of the Chief Financial Officer of GT Gold Chasers Ltd. ("GT Gold"). GT Gold is junior mining company, that is hoping to hit it big with their next mining...

GPT 9 4 4 .

Are you more in agreement with Charles or with Tina about whether toys teach important lessons to children?

How does interconnectivity change how we live and work?

Can you suggest ways to avail ourselves of the advantages offered by personal and social media for personal and professional growth, without experiencing some of the real and potential disadvantages...