FIN/370 WEEK 5 INDIVIDUAL FINANCING STRATEGY PROBLEMSPROBLEM 3 CHAPTER 20 BASIC FINANCEFill in the...

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FIN/370 WEEK 5 INDIVIDUAL FINANCING STRATEGY PROBLEMSPROBLEM 3 CHAPTER 20 BASIC FINANCEFill in the table using the following information.Assets required for operation: $10,000Firm A uses only equity financingFirm B uses 30% debt with a 6% interest rate and 70% equityFirm C uses 50% debt with a 10% interest rate and 50% equityFirm D uses 50% preferred stock financing with a dividend rate of 10% and 50% equity financingEarnings before interest and taxes: $1,000
	
Document Preview: FIN/370 WEEK 5 INDIVIDUAL FINANCING STRATEGY PROBLEMSPROBLEM 3 CHAPTER 20 BASIC FINANCEFill in the table using the following information.Assets required for operation: $10,000Firm A uses only equity financingFirm B uses 30% debt with a 6% interest rate and 70% equityFirm C uses 50% debt with a 10% interest rate and 50% equityFirm D uses 50% preferred stock financing with a dividend rate of 10% and 50% equity financingEarnings before interest and taxes: $1,000ABCDebt outstanding $$$Stockholders’ equityEarnings before interest and taxes300300300Interest expenseEarnings before taxesTaxes (40% of earnings)Net earningsReturn on stockholders’ equity%%%ALL WORK MUST BE SHOWN

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FIN/370 WEEK 5 INDIVIDUAL FINANCING STRATEGY PROBLEMS 
PROBLEM 3 CHAPTER 20 BASIC FINANCE 
Fill in the table using the following information. 
Assets required for operation: $10,000 
Firm A uses only equity financing 
Firm B uses 30% debt with a 6% interest rate and 70% equity 
Firm C uses 50% debt with a 10% interest rate and 50% equity 
Firm D uses 50% preferred stock financing with a dividend rate of 10% and 50% equity financing 
Earnings before interest and taxes: $1,000 
 A B C 
Debt outstanding  $ $ $ 
Stockholders’ equity    
Earnings before interest and 
taxes 
300 300 300 
Interest expense    
Earnings before taxes    
Taxes (40% of earnings)    
Net earnings    
Return on stockholders’ equity % % %
ALL WORK MUST BE SHOWN 
a) If earnings before interest and taxes: $1,000 
SOLUTION 
  A B C 
Debt Outstanding   $3,000 $5,

FIN/370 WEEK 5 INDIVIDUAL FINANCING STRATEGY PROBLEMS PROBLEM 3 CHAPTER 20 BASIC FINANCE Fill in the table using the following information. Assets required for operation: $10,000 Firm A uses only...

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