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BUS 401 ? Week one assignment 1 4-10. (Financial ratios?A+ Answer or MONEY BACK GUARANTEED!

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Solution;Return earned on the common stockholders? investment;Post-Renovation Analysis;Return on common equity = Net Income Available to common stockholders/Equity;= $217,500/ ($1,000,000 + 500,000);= 14.5%;Net Income Available to Common stockholders;Operating Income (.13 x $4.5m) ????????-$ 585,000;Less: Interest ($100,000 + $50,000) ??????- (150,000);Earnings before Taxes?????????????435,000;Less: Taxes (50%) ?????????????- (217,500);Net Income Available to Common stockholders??? $217,500;Pre-renovation Analysis;ROCE = $200,000/$1,000,000;= 20%;Comparative Analysis;Renovation would not be undertaken because of argument of comparison of the two rates of return. Since investments in fixed assets produce cash flows continuously over years, therefore it is inappropriate to base decisions about the acquisition on a single year?s ratios.

 

Paper#22653 | Written in 18-Jul-2015

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