Sweetums Inc, a confectioner best known for its mint ogre balls, uses the residual dividend model to set its dividends. Selected financial information for Sweetums Inc is provided in the table below
Given the investment plan summarized in the table, how much new debt will it have to take on in order to maintain its target capital structure?
Selected Financial Information
Sweetums Inc
Net income $90 million
Equity capital structure weight 0.60
Investments $100 million
Dividends $0.30 per share
A) $30 million
B) $40 million
C) $60 million
D) $90 million
E) $100 million
B
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Alex, Clinton, and Evan are in a partnership. Evan decides to withdraw from the partnership by selling his interest to Linsey. Alex and Clinton agree to this. Alex's Capital account and Clinton's Capital account
A) will not be affected when Linsey is admitted. B) will decrease when Linsey is admitted. C) will increase when Linsey is admitted. D) cannot be determined from the information given.
While in the process of posting from the journal to the ledger, a company failed to post a $500 debit to the Equipment account. The effect of this error will be that:
A. The error will overstate the credits listed in the journal. B. The Equipment account balance will be overstated. C. The total debits in the trial balance will be larger than the total credits. D. The trial balance will not balance. E. The error will overstate the debits listed in the journal.
With a general line of credit, the bank:
A. does not charge a commitment fee. B. charges a commitment fee on the total amount. C. charges a commitment fee on the used balance. D. charges a commitment fee on the unused balance. E. charges the same total fees as it does with a revolving credit agreement.
What is the combined debt and equity income (interest plus earnings after tax) for the Equity and Debt firm?
A) $700,000 B) $760,000 C) $560,000 D) $300,000