You have been given the attached information on the Crum Company. Crum expects sales to grow...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 operated at 40 percent of capacity in 2013, but all other assets were used to full capacity. Underutilized fixed assets cannot be sold. Current assets and spontaneous liabilities should increase in proportion to sales during 2014. The company plans to finance any external funds needed as 35 percent notes payable and 65 percent common stock. The interest rate is 8 percent, base interest expense on the debt at the beginning of the year (cash earns no interest income). The dividend payout ratio will remain constant, irrespective of how many shares of stock are outstanding What is Crum's projected ROE using the percentage of sales method? (Ignore any financing feedback effects.) Information on the Crum Company: 2014 Forecast 2014 After AFN 2013 $1,000.00 800.00 $ 200.00 15.00 $ 185.00 74.00 $ 111.00 66.60 44.40 Sales Operating costs EBIT Interest EBT Taxes (40%) Net Income Dividends (60%) Add'n to R.E. Current Assets Net fixed Assets $ 700.00 300.00 $1.000.00 Total assets $ 150.00 200.00 150.00 500.00 A/P and Accruals N/P Common stock Retained earnings Total Liab & Equity $1.000.00 AFN Profit Margin ROE Debt/Assets Current ratio Payout Ratio 11.04% 16.98% 35.00% 2.00x 60.00% Dollars AFN Financing: N/P Weights 0.3500 0.6500 1.0000 Common Stock 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 operated at 40 percent of capacity in 2013, but all other assets were used to full capacity. Underutilized fixed assets cannot be sold. Current assets and spontaneous liabilities should increase in proportion to sales during 2014. The company plans to finance any external funds needed as 35 percent notes payable and 65 percent common stock. The interest rate is 8 percent, base interest expense on the debt at the beginning of the year (cash earns no interest income). The dividend payout ratio will remain constant, irrespective of how many shares of stock are outstanding What is Crum's projected ROE using the percentage of sales method? (Ignore any financing feedback effects.) Information on the Crum Company: 2014 Forecast 2014 After AFN 2013 $1,000.00 800.00 $ 200.00 15.00 $ 185.00 74.00 $ 111.00 66.60 44.40 Sales Operating costs EBIT Interest EBT Taxes (40%) Net Income Dividends (60%) Add'n to R.E. Current Assets Net fixed Assets $ 700.00 300.00 $1.000.00 Total assets $ 150.00 200.00 150.00 500.00 A/P and Accruals N/P Common stock Retained earnings Total Liab & Equity $1.000.00 AFN Profit Margin ROE Debt/Assets Current ratio Payout Ratio 11.04% 16.98% 35.00% 2.00x 60.00% Dollars AFN Financing: N/P Weights 0.3500 0.6500 1.0000 Common Stock
Expert Answer:
Answer rating: 100% (QA)
Answer Percentage of sales method and ROE 1999 Working and ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
A stone is dropped from top of a tower 300 m high and at the same time another stone is projected vertically upward witha velocity of 100 ms. Find when they will meet (g = 10ms) I 1 1) 2 s 2)5 s 3) 3...
-
You have been given information regarding a company in which one of your friends is interested in investing. Help your friend by calculating some cash-based ratios.
-
You are given the attached information about Fred pic, comprising summarized P&L accounts, summarized balance sheets and some suggested ratio calculations. You should note that there may be...
-
Define pricing practices of tesla INC as well as market structure.
-
Find the vertex, the focus, and the directrix of the parabola. Then draw the graph. a. x2 = 12y b. y2 + 2y - 8x - 7 = 0
-
Rodney Atwater is a sales representative for American Silk Mills. Because he visits customer sites, he has a company car. He drove 25,500 miles during 2018, of which he reported 15 percent was...
-
What is the function of an administrative agency?
-
The observation of a clients physical inventory is a mandatory auditing procedure when possible for the auditors to carry out and when inventories are material. a. Why is the observation of physical...
-
What are the key mechanisms through which organizational culture is transmitted and sustained across generations of employees ?
-
In this mini-case, you will complete the test of details on accounts receivable for the 2019 audit of EarthWear Clothiers, Inc. The principal test of detail involves sending "confirmations" or...
-
Write a report about the data analysis of the effect on labor when Malaysia participated the Trans-Pacific Partnership Agreement (TPPA)?
-
Trees Forever, a community foundation, incurred $5,000 in expenses during 20X3 putting on its annual fund-raising talent show. In its statement of activities, Trees Forever should report the $5,000...
-
You are the CEO of a company based in Abu Dhabi that imports fresh dates from South Africa to be processed at a site each in the United Arab Emirates, Saudi Arabia, Lebanon, Oman, and Kuwait. The...
-
Assume that the investors initial wealth is $40,000 and that her utility function is U = W 1/2 . What is the expected utility of the portfolio described in question 61? Question 61 Assume that the...
-
In September 2022, the English Premier League, together with the clubs and law enforcement authorities, ran an anti-counterfeiting conference. During the 202122 season, the Premier Leagues...
-
The following expenditures were among those a not-for-profit botanical society incurred during 20X4: What amount should be classified as fund-raising costs in the societys activity statement? a. $0...
-
How do enzyme kinetics elucidate the dynamic interplay between substrate concentration, enzyme activity, and reaction rates, particularly within the context of complex biochemical pathways?
-
Write electron configurations for the following ions, and determine which have noble-gas configurations: (a) Cd2+ (b) p3- (c) Zr4+ (d) Ru3+ (e) As3- (f) Ag+
-
Arnell Industries has $10 million in permanent debt outstanding. The firm will pay interest only on this debt. Arnells marginal tax rate is expected to be 35% for the foreseeable future. a. Suppose...
-
What would AMCs share price be after the repurchase if its enterprise value goes up? What would AMCs share price be after the repurchase if its enterprise value declines?
-
You are thinking about leasing a car. The purchase price of the car is $30,000. The residual value (the amount you could pay to keep the car at the end of the lease) is $15,000 at the end of 36...
-
Discuss how we should handle business rules in the architecture of an information system.
-
Some might say that coding is not as important as analysis or design since programming errors can be identified and corrected easily. Do you agree with this statement? Why?
-
What are the major activities of implementation? How do they relate to each other?
Study smarter with the SolutionInn App