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FIN - This year Jones Corp




Question;1) This year Jones Corp achieved an ROE of 17.7%. Suppose the Board of Directors of Jones mandates thatmanagement take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, andAssets remain the same next year, what effect would you expect this new Leverage policy will have on Jones ROE?Select: 1Jones ROE will increase.Jones ROE will decrease.Jones ROE will remain the same.2) On the Income Statement, which of the following would be classified as a variable cost?Select: 1Promotion ExpenseDepreciation ExpenseDirect Labor ExpenseR&D Expense3) It is January 2nd. Senior management of Jones meets to determine their investment plan for the year. They decideto fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFOhappily notes this will raise their Leverage (=assets/equity) to a new target of 2.7. Assume the stock can be issued atyesterdays stock price ($39.45). Which of the following statements are true? Check all that apply.Select: 3The Jones bond issue will be $3,353,250Jones will issue stock totaling $1,972,500Total investment for Jones will be $5,325,750The Jones Working Capital will be unchanged at $15,188Long term debt will increase from $84,887,453 to $86,859,953Total Assets will rise to $228,662,0004) The Browns workforce complement will grow by 10% (rounded to the nearest person) next year. Ignoring downsizing fromautomating, what would their total recruiting cost be? Assume Brown spends the same amount extra above the $1,000recruiting base as they did last year.BrownNeeded Complement547Complement5471st Shift Complement3832nd Shift Complement164Overtime%0.0%Turnover Rate6.3%New EmployeesSeparated EmployeesRecruiting SpendTraining HoursProductivity IndexRecruiting CostSeparation CostTraining CostTotal HR Admin Cost1210$5,00080123.0%$725$0$876$1,601Labor Contract Next YearWages$3,612,000$3,010,0002.0%Annual Raise$330,0002,500Profit Sharing$275,000$28.15Benefits5.0%5) Company Baldwin invested $57,612,000 in plant and equipment last year. The plant investment was funded withbonds at a face value of $35,038,817 at 13.8% interest, and equity of $22,573,183. Depreciation is 15 years straightline. For this transaction alone which of the following statements are true? Select: 5Cash went down by $57,612,000 when the plant was purchased.Cash went up when the Bond was issued by $35,038,817.Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retainedearnings.On the Balance sheet, Long Term Debt changed by $35,038,817.Cash was pulled from retained earnings to cover the $22,573,183 difference between the plant purchase and bondissue.Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by$22,573,183, the difference between the investment $57,612,000 and the bond $35,038,817.Depreciation increased by $3,840,800.On the Balance sheet, Plant & Equipment increased by $57,612,000.


Paper#47992 | Written in 18-Jul-2015

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