Patton Paints Corporation has a target capital structure of $40 \%$ debt and $60 \%$ common equity, with no preferred stock. Its before-tax cost of debt is $12 \%$, and its marginal tax rate is $40 \%$. The current stock price is $\mathrm{P}_0=\$ 22.50$. The last dividend was $\mathrm{D}_0=\$ 2.00$, and it is expected to grow at a $7 \%$ constant rate. What is its cost of common equity and its WACC?

For the fiscal year, sales were $191,350,000 and the cost of merchandise sold was$114,800,000.

a. What was the amount of gross profit?
b. If total operating expenses were $18,250,000, could you determine net income?
c. Is Customer Refunds Payable an asset, liability, or owner’s equity account, and what is its normal balance?
d. Is Estimated Returns Inventory an asset, liability, or owner’s equity account, and what is its normal balance?

Design a class named Account that contains: - A private int data field named id for the account (default 0). - A private double data field named balance for the account (default 0). - A private double data field named annualInterestRate that stores the current interest rate (default 0). Assume all accounts have the same interest rate. - A private Date data field named dateCreated that stores the date when the account was created. - A no-arg constructor that creates a default account. - A constructor that creates an account with the specified id and initial balance. - The accessor and mutator methods for id, balance, and annualInterestRate. - The accessor method for dateCreated. - A method named getMonthlyInterestRate() that returns the monthly interest rate. - A method named getMonthlyInterest() that returns the monthly interest. - A method named withdraw that withdraws a specified amount from the account. - A method named deposit that deposits a specified amount to the account. Draw the UML diagram for the class and then implement the class. (Hint: The method getMonthlyInterest() is to return monthly interest, not the interest rate. Monthly interest is balance * monthlyInterestRate. monthlyInterestRate is annualInterestRate / 12. Note that annualInterestRate is a percentage, e.g., like 4.5%. You need to divide it by 100.) Write a test program that creates an Account object with an account ID of 1122, a balance of $20,000, and an annual interest rate of 4.5%. Use the withdraw method to withdraw$2,500, use the deposit method to deposit $3,000, and print the balance, the monthly interest, and the date when this account was created.

On January 1, 2017, Vahsholtz Corporation purchased 5,000 shares of treasury stock. Other information regarding Vahsholtz Corporation is provided as follows.

$$\begin{array}{lrr} &\textbf{\underline{~~2016~~}}&\textbf{\underline{~~2017~~}}\\ \text{Net income}&\$100,000&\$110,000\\ \text{Dividends on preferred stock}&\$30,000&\$30,000\\ \text{Dividends on common stock}&\$20,000&\$25,000\\ \text{Weighted-average number of common shares outstanding}&50,000&45,000\\ \text{Common stockholders' equity beginning of the year}&\$600,000&\$750,000\\ \text{Common stockholders' equity end of the year}&\$750,000&\$830,000\\ \end{array}$$

Compute (a) return on common stockholders’ equity for each year.

Explain Economic Impact of Computers

Write a paragraph explaining how the use of computers in the workplace contributed to economic growth in the postwar years. Explain when workers first began building and using computers and how the government and private businesses and industry used computers.

Once Bitten Corp. applies no debt. The weighted average cost of capital is 9.5 percent. If the current market value of the equity is $20.4 million and there are no taxes, what is EBIT?

Calculate the missing amount in each of the following separate companies a through d.

	(a)	(b)	(c)	(d)
Equity, December 31, 2009	$0	$0	$0	$0
Owner investments during the year	110,000	?	87,000	210,000
Net income (loss) for the year	?	(47,000)	(10,000)	(55,000)
Owner withdrawals during the year	22,000	90,000	(4,000)	?
Equity, December 31, 2010	104,000	85,000	?	110,000

The Nolan Corporation finds it is necessary to determine its marginal cost of capital. Nolan's current capital structure calls for 50 percent debt, 30 percent preferred stock, and 20 percent common equity. Initially, common equity will be in the form of retained earnings $\left(K_e\right)$ and then new common stock $\left(K_n\right)$. The costs of the various sources of financing are as follows: debt, $9.6$ percent; preferred stock, 9 percent; retained earnings, 10 percent; and new common stock, $11.2$ percent. What is the initial weighted average cost of capital? (Include debt, preferred stock, and common equity in the form of retained earnings, $K_e$.)

The stockholders' equity section of Jun Company's balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 10% stock dividend. The stock's per share market value on April 2 is $\$ 20$ (prior to the dividend). Prepare the stockholders' equity section immediately after the stock dividend.

$$\begin{array}{lr} \text{Common stock-\$5 par value, 375,000 shares authorized, 200,000 shares issued and outstanding}&\$1,000,000\\ \text{Paid-in capital in excess of par value, common stock}&600,000\\ \text{Retained earnings}&\underline{833,000}\\ \text{Total stockholders' equity}&\underline{\underline{\$2,433,000}} \end{array}$$

At the moment, Charter Enterprises is entirely funded by equity and has assets worth $1 million. It's thinking about altering its capital structure. Calculate the debt and equity balances that would exist if the company switched to the following debt ratios: 10%, 20%, 30%, 40%, 50%, 60%, and 90%. (Note: The total number of assets would remain the same.) Does the debt ratio have a maximum value?

Determine the financial statement on which the item below appears. Use I for income statement. E for statement of owner's equity, and B for balance sheet.
 Owner Withdrawals

Assume the following relationships for the Caulder Corp.: $$ \begin{matrix} \text{Sales/Total assets} & \text{1.3 }{\times}\\ \text{Return on assets (ROA)} & \text{4.0\\%}\\ \text{Return on equity (ROE)} & \text{8.0\\%}\\ \end{matrix} $$ Calculate Caulder’s profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital.

How would you answer in the debate shown below?

Q: Isn’t it true that the riskiness of a firm’s equity will rise if the firm increases its use of debt financing?
A: Yes, that’s the essence of M&M Proposition II.
Q: And isn’t it true that, as a firm increases its use of borrowing, the likelihood of default increases, thereby increasing the risk of the firm’s debt?
A: Yes.
Q: In other words, increased borrowing increases the risk of the equity and the debt?
A: That’s right.
Q: Well, given that the firm uses only debt and equity financing, and given that the risks of both are increased by increased borrowing, does it not follow that increasing debt increases the overall risk of the firm and therefore decreases the value of the firm?
A: ?

Define each of the following terms:

Stockholders' equity; retained earnings; working capital; net working capital; net operating working capital (NOWC); total debt