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Company A has a capital structure that consists of 20% equity and 80% debt. The Company expects to report 3 million in net income this year and 60% of the net income will be paid out as dividends. How large must the firm s capital budget be this year without it having to issue any new common stock and why?

The management of an amusement park is considering purchasing a new ride for $80,000 that would have a useful life of 10 years and a salvage value of 10,000. The ride would require annual operating costs of $32,000 throught its useful life. The company s discount rate is 9%. Management is unsure about how much additional ticket revenue the new ride would generate particularyly since customrs pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new cusotmers.
How much additonal revenue would the ride have to generate per year to make it an attractive investment?

Calculating the net income from operations.

The balance of Company A at the beginning of the year showed liabilities of $346,000. During the year liabilities increased by 14 000, assets increased by 65 000, and paid in capital also increased 20 000 to 165 000. Dividends declared and paid during the year were 51 000. At the end of the year owners equity totaled 402 000. What is net income or loss for the year?

Company A provides warranties for many of its products. The January 1, 2002 balance of an estimated warranty liability account was 26,700. Based on an analysis of warranty claims during the past several years, this year s warranty provision was estimated to be 0.3 percent of sales. During 2002, the actual costs of servicing products under warranty were 11,900 and sales were 4,200,000.

What amount of warranty expense will appear on the income statement for 2002 and what will be reported in the estimated warranty liability account on the December 31,2002 balance sheet?

An investor purchases a $1,000 par value bond that pays $60 interest each six month period and has 8 years to maturity. The investor plans to hold the bond for 5 years and sell it in the market. The current required rate of return in the market is 14%, but is expected to drop to just 10% at the time of the sale due to projected falling interest rates. The price the investor is willing to pay for this bind is what?