ch.4 - Question 1 1. Beranek Corp has $665,000 of assets,...

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1. Beranek Corp has $665,000 of assets, and it uses no debt--it is financed only with common equity. The new CFO wants to employ enough debt to raise the debt/assets ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio? Answer $303,240 $266,000 $324,520 $250,040 $252,700 10 points Question 2 1. Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $520,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant? Answer 10.71% 9.41% 10.82% 8.11% 12.66% 10 points Question 3 1. Royce Corp's sales last year were $260,000, and its net income was $23,000. What was its profit margin? Answer
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This note was uploaded on 02/27/2012 for the course FIN FIN3403 taught by Professor C.kalogeras during the Fall '09 term at FIU.

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ch.4 - Question 1 1. Beranek Corp has $665,000 of assets,...

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