The following data were taken from Mesa Company’s balance sheet:

Particulars	Dec. 31, 2014	Dec. 31, 2013
Total liabilities	$  547,800	$  518,000
Total owner's equity	415,000	370,000

a. Compute the ratio of liabilities to owner’s equity. b. Has the creditor’s risk increased or decreased from December 31, 2013, to December 31, 2014?

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: ?

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?

Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8%, and its marginal tax rate is 40%. The current stock price is $\mathrm{P}_{0}=\$ 22.00$. The last dividend was $\mathrm{D}_{0}=\$ 2.25$, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?

Consider the following declaration:

template <class type>
class strange
{
    .
    .
    .
private:
    type a;
    type b;
};

Assume that two objects of type strange are equal if their corresponding member variables are equal. Write the definition of the function operator== for the class strange, which is overloaded as a member function.

The following information was taken from Einar Company’s balance sheet:

$$\begin{array}{llr} \text{Fixed assets (net)}&\text{\$1,800,000}\\ \text{Long-term liabilities}&\text{600,000}\\ \text{Total liabilities}&\text{900,000}\\ \text{Total stockholders’ equity}&\text{750,000}\\ \end{array}$$

Determine the company’s (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders’ equity.

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.

Many companies in recent years have bought back their common stock. For example, IBM, with large cash holdings, spent almost $35 billion over three years repurchasing its stock.18 What are the reasons companies buy back their own shares? What is the effect of common stock buybacks on earnings per share, return on equity, return on assets, debt to equity, and the current ratio?

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

Company A and Company B both start 2012 with $1 million of shareholders’ equity and 100,000 shares of common stock outstanding. During 2012, both companies earn net income of$100,000, a return of 10% on common shareholders’ equity at the beginning of 2012. Company A declares and pays $100,000 of dividends to common shareholders at the end of 2012, whereas Company B retains all its earnings and declares no dividends. During 2013, both companies earn net income equal to 10% of shareholders’ equity at the beginning of 2013.

b. Compute the rate of growth in earnings per share for Company A and Company B, comparing earnings per share in 2013 with earnings per share in 2012.

This period, Amadeus Co. purchased its only available-for sale investment in the notes of Bach Co. for $83,000. The period-end fair value of these notes is$84,500. Amadeus records a

a. Credit to Unrealized Gain-Equity for $1,500.

b. Debit to Unrealized Loss-Equity for$1,500.

c. Debit to Investment Revenue for $1,500.

d. Credit to Fair Value Adjustment- Available-for-Sale for$3,500.

e. Credit to Cash for $1,500.

During the current fiscal year, sales were $8,135,000, sales discounts were$795,000, sales returns and allowances were $475,000, and the cost of merchandise sold was$5,100,000.

a. What was the amount of net sales?

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

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?