Question 1. The Digby's balance sheet has $120,271,000 in equity. Further, the company is expecting $3,000,000 in net income next year. Assuming no dividends are paid and no stock is issued, what would their Book Value be next year? Book value this year is $32.25.
1) $32.25
2) $14.24
3) $68.75
4) $33.05
Question 2. Baldwin Corporation is considering adding capacity to their Brat product, currently automated to 7.0. Assume:
- They will use the new capacity next year to make and sell 200 additional units.
- Each unit of capacity will cost $34.00.
- Brat's price will be unchanged at $34.00.
- Material costs will remain $13.04 next year.
- Labor costs will remain $5.34 on first shift, and $7.91 on second shift.
- Bond interest will remain 11.6% next year.
- Depreciation will be straight line over 15 years.
- SG&A costs can be ignored because they would be the same with or without the new capacity.
Which of the following tactics will yield the highest ROI in their first year of production?
1) Buy 100 units of capacity. Finance the $3,400 purchase entirely with a new bond.
2) Buy 200 units of capacity. Finance the $6,800 purchase entirely with a new bond.
3) Buy 100 units of capacity. Finance the $3,400 purchase entirely with a stock issue.
4) Buy 200 units of capacity. Finance the $6,800 purchase entirely with a stock issue.
Question 3. Currently Baldwin is paying a dividend of $20.76. If this dividend were raised an additional $3.64, given its current stock price ( $179.35) what would be the Dividend Yield?
1) 11.6%
2) 13.6%
3) $24.40
4) $17.12
Question 4. Currently Ark is charged $2,165,067 Depreciation on the Income Statement of Andrews. Andrews is planning for an increase in this depreciation. On the financial statements of Andrews will this?
1) Just impact the Balance Sheet.
2) Have no impact on the Net Cash from Operations as depreciation appears in both Cash Flow and the Income Statement.
3) Decrease Net Cash from Operations on the Cash Flow Statement.
4) Increase Net Cash from Operations on the Cash Flow Statement.