Question

1) Axel Telecommunications has a target capital structure that consists of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $ 3,000,000.If Axel reports net income of $ $ 2,000,000 and it follows a residual dividend payout policy, what will be its dividend?
2) Gamma Medical’s stock trades at $90 per share, The company is contemplating a 3 for 2 stock split. Assuming that the stock split will have no effect on the market value of its equity. What will be the company’s stock price following the stock split?
3) Beta industries has net income of $ 2,000,000 and it has 1,000,000 shares of common stock outstanding. The company’s stock currently trades at 4 32 a share. Beta is considering a plan in which it will use available cash to repurchase 20% of its shares in the open market. The repurchase is expected to have no effect on net income or its stock price. What will be Beta’s EPS following the stock repurchase.?
4) After a 5 for 1 stock split, Strasburg Company paid a dividend of $0.75 per new share, which represents a 9% increase over last year’s pre split dividend. What was last year’s dividend per share?
5) Northern Pacific Heating and Cooling Inc, it has a 6 month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 40% with a $ 10 million investment in plant and machinery. The firm wants to maintain a 40% debt level in its capital structure.It also wants to maintain its past dividend policy of distributing 45% of last years net income. In 2012,net income was $5 million. How much external equity must Northern Pacific seek at the beginning of 2013 to expand capacity as desired? Assume that the firm uses only debt   and common equity in its capital structure.
6) What are some pros and cons of holding high levels of current assets in relation to sales? Use the DuPont equation to help explain your answer.
7) Define the cash conversion cycle, (CCC) and explain why holding other things constant a firm’s profitability would increase if it lowered its CCC.
8) What are the two definitions of cash, and why do corporate treasures often use the second definition?
9) What is a cash budget, and how can this statement be used to help reduce the amount of cash that a firm needs to carry?
What are the advantages and disadvantages of daily over monthly cash budgets and how might a cash budget be used when a firm is negotiating a loan from its bank?

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1) Axel Telecommunications has a target capital structure that consists of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $ 3,000,000.If Axel reports net income of $ $ 2,000,000 and it follows a residual dividend payout policy, what will be its dividend?

Equity retained = .3($3,000,000)=$900,000
NI $2,000,000
Minus Additions to RE    900,000
Earnings Remaining $1,100,000 to be paid out as dividends

2) Gamma Medical’s stock trades at $90 per share, The company is contemplating a 3 for 2 stock split. Assuming that the stock split will have no effect on the market value of its equity. What will be the company’s stock price following the stock split?

(90*2)/3 = $60...

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