Mary owns 100 percent of a gift shop with an equity value of $150,000. If she keeps the shop open 5 days a week, EBIT is $75,000. If the shop remains open 6 days a week, EBIT increases to $92,000 annually. Mary needs an additional $50,000 which she can raise today by either selling stock or issuing debt at an interest rate of 7 percent. The principal amount would be repaid at the end of the fifth year. Ignore taxes. What will be the cash flow for this year to Mary if she issues debt, remains open 6 days a week, and distributes all the residual cash flow to the shareholders?
A) $46,125
B) $88,500
C) $65,000
D) $71,500
E) $81,500
B) $88,500
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Which activity is most appropriate for the first step of the career management process?
A. identifying the steps and timetable to reach a goal B. goal setting C. reality checking D. specifying the competencies to be developed E. self-assessment
Which of the following statements is correct??
A. ?Sensitivity analysis is incomplete because it fails to consider the range of likely values of key variables as reflected in their probability distributions. B. ?In comparing two projects using sensitivity analysis, the one with the steeper lines would be considered less risky, because a small error in estimating a variable, such as unit sales, would produce only a small error in the project's net present value (NPV). C. ?The primary advantage of simulation is that it provides a very accurate point estimate of a project's NPV. D. ?One important benefit of simulation analysis as compared to scenario analysis is that once the analysis is complete, it provides a clear accept/reject decision rule. E. ?Simulation considers only discrete outcomes for a project.
The balance column in a ledger account is:
A. A column for showing the balance of the account after each entry is posted. B. An account used to record the transfers of assets from a business to its owner(s). C. Another name for the dividends account. D. An account entered on the balance sheet. E. A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction.
The gross margin ratio is defined as gross margin divided by net sales.
Answer the following statement true (T) or false (F)