GLASS Inc. is a manufacturer of aircraft equipment with a year end of July 31. As...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
GLASS Inc. is a manufacturer of aircraft equipment with a year end of July 31. As VP of Finance, you have been assessing two new business alternatives. The Company has current revenues of $90,000,000 and earnings before interest and tax of 20% of revenues. Amortization is $1,400,000 and long term debt has a rate of 7% per annum. The current effective tax rate is 28%. Total assets are 90 times amortization with long term debt equal to 80% of revenues. Financial details of the business options are provided below: Option 1 Revenue = Operating Expenses = Amortization = Interest expense = Debt = Equity = Tax Rate = Option 2 Revenue Operating expenses Amortization = Interest expense = Debt = Equity = Tax Rate = $49,000,000 70% of revenues $1,500,000 8% of total debt related to this option 53% of Total Assets $39,000,000 25% 1.6 times Operating expenses $25,000,000 $2,700,000 10% of debt related to this option $30,000,000 50% of Total Assets 26% EQUIRED: Prepare supporting schedules and conclusion for the President answering the following: a) Calculate the EBITDA, EBIT, EBT, Net Income and Return on Shareholder Equity for each option and current position.. (15 marks) GLASS Inc. is a manufacturer of aircraft equipment with a year end of July 31. As VP of Finance, you have been assessing two new business alternatives. The Company has current revenues of $90,000,000 and earnings before interest and tax of 20% of revenues. Amortization is $1,400,000 and long term debt has a rate of 7% per annum. The current effective tax rate is 28%. Total assets are 90 times amortization with long term debt equal to 80% of revenues. Financial details of the business options are provided below: Option 1 Revenue = Operating Expenses = Amortization = Interest expense = Debt = Equity = Tax Rate = Option 2 Revenue Operating expenses Amortization = Interest expense = Debt = Equity = Tax Rate = $49,000,000 70% of revenues $1,500,000 8% of total debt related to this option 53% of Total Assets $39,000,000 25% 1.6 times Operating expenses $25,000,000 $2,700,000 10% of debt related to this option $30,000,000 50% of Total Assets 26% EQUIRED: Prepare supporting schedules and conclusion for the President answering the following: a) Calculate the EBITDA, EBIT, EBT, Net Income and Return on Shareholder Equity for each option and current position.. (15 marks)
Expert Answer:
Answer rating: 100% (QA)
a Calculation of EBITDA EBIT EBT Net Income and Return on Shareholder Equity for Each Option and Cur... View the full answer
Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
Posted Date:
Students also viewed these accounting questions
-
(a) Find an equation of the line that passes through the point (0, 9) and is parallel to 5x + 3y = 4. I
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Chromalox Instruments and Controls, located in LaVergne, Tennessee, is a manufacturer of industrial process controllers, monitors, and industrial and military control panels. Chromalox products are...
-
Alistair bought a house on 1 April 2000 for 125,000 and occupied the entire house as his principal private residence until 1 November 2008. As from that date, he rented out two rooms (comprising...
-
(Postretirement Benefit Expense Computation) Kreter Co. provides the following information about its postretirement benefit plan for the year 2010. Compute the postretirement benefit expense for...
-
Hydraulic operations are nearly ____% efficient.
-
Stanford Corporation began the year with 150,000 shares of common stock outstanding. On March 1, an additional 10,000 shares of common stock were issued. On August 1, another 16,000 shares of common...
-
Gotham City issued $500,000 of 8% regular serial bonds at par (no accrued interest) on January 2, 20X0, to finance a capital improvement project. Interest is payable semiannually on January 2 and...
-
Spot Rate $1.30/GBP Forward Rate (3 month) $1.25/GBP UK Interest Rate (annualized) 12% USA Interest Rate (annualized) 16% 1.Compute the 3-month forward rate implied by this data.
-
Determine the moment of each force about the bolt located at A. Given: FB = 40 lb a = 2.5 ft α = 20 deg γ = 30 deg FC = 50 lb b = 0.75 ft β = 25 deg Fc FB
-
South African law has developed, and is still developing, significantly. We draw influences from different legal systems, and we have undergone different phases of growth and development. Identify...
-
What extent do cultural and societal factors influence the development and implementation of accountability measures in international contexts, and how can organizations adapt their practices to...
-
Article "the future of immigrant children " by Ron Haskins and Marta Tienda summarize a brief description on the policy brief
-
What are the key challenges in creating systems of accountability within governmental institutions, and how can these obstacles be effectively overcome to promote public trust and accountability ?
-
A trustee of a testamentary trust owns title to an apartment complex. The trustee also owns title to nine other apartment complexes in his individual name, not the name of the trust. While the...
-
Some parts of this question ask you to apply course concepts to the song I Can, by Nas. This is a rap song that contains elements of classical music, specifically Beethoven's F Elise. The artist raps...
-
John was driving a car at a speed of 20.5 m/s and stopped car in 2.5 s using brakes. If the mass of car with him is 1.5x10 6 g, what is the average horizontal force exerted on it during braking?...
-
A bubble-point liquid feed is to be distilled as shown in Figure. Use the Edmister group method to estimate the mole-fraction compositions of the distillate and bottoms. Assume initial overhead and...
-
The total discount for both control and marketability is closest to A. 15 percent. B. 32 percent. C. 35 The senior vice president of acquisitions for Northland Industries, Angela Lanton, and her head...
-
Shunichi Kobayashi is valuing United Parcel Service (NYSE: UPS). Kobayashi has made the following assumptions: Book value per share is estimated at $ 9.62 on 31 December 2007. EPS will be 22 percent...
-
Jim Martin is using economic value added (EVA) and market value added (MVA) to measure the performance of Sundanci. Martin uses the following fiscal year 2000 information for his analysis: Adjusted...
-
Perfect competition is a market structure involving a(n) _________ number of buyers and sellers, a(n) _________ product, and _________ market entry and exit.
-
Because of _________ market entry and exit, perfectly competitive markets generally consist of a(n) _________ number of small suppliers.
-
Because perfectly competitive markets have _________ buyers and sellers, each firm is so _________ in relation to the industry that its production decisions have no impact on the market.
Study smarter with the SolutionInn App