Author Question: The key outputs of the short-term financial planning process are the ________. A) cash budget, ... (Read 943 times)

Zoey63294 · **on:** Jul 10, 2018

The key outputs of the short-term financial planning process are the ________.

A) cash budget, pro forma income statement, and pro forma balance sheet
B) sales forecast and capital assets journal
C) sales forecast and schedule of changes in working capital
D) income statement, balance sheet, and source and use statement

Question 2

Zheng Sen's Chinese Take-Out had earnings before interest and taxes of 4,000,000 last year.

The firm has a marginal tax rate of 40 percent and currently has the following capital structure:

(a) Calculate the firm's after-tax return on equity (ROE) and earnings per share (EPS).
(b) If the firm retires 4,000,000 of preferred stock using the proceeds from an equal increase in long-term debt, what would have been the after-tax return on equity (ROE) and earnings per share (EPS)?
(c) If the firm retires 4,000,000 of preferred stock using the proceeds from the sale of 500,000 shares of common stock, what would have been the after-tax return on equity (ROE) and earnings per share (EPS)?

bulacsom · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

A

Answer to Question 2

(a)

8,000,000 0.12 = 960,000
ROE = Net profits after taxes / Stockholders' equity
(where stockholders' equity includes preferred stock).
EPS = Earnings available to common stockholders (EAC) / Common share outstanding
(b)

(c)