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.

Following is the stockholders' equity section from the The Coca-Cola Company 20 I7 balance sheet. (All amounts in millions except par value.)

At what average cost were the Coca-Cola treasury stock shares purchased?

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 earning per share for Company A and Company B, comparing earnings per share in 2013 with earnings per share in 2012

Best Buy Co., Inc., reported the following amounts in its February 3, 2018, and January 28, 2017, financial statements.

Compute Best Buy's debt-to-equity ratio as of February 3, 2018.

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?

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?

The following information was taken from Sigmund Company's balance sheet:

$$\begin{array}{lr}\text { Fixed assets (net) } & \$ 1,050,000 \\ \text { Long-term liabilities } & 750,000 \\ \text { Total liabilities } & 850,000 \\ \text { Total stockholders' equity } & 500,000\end{array}$$

Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. Round to one decimal place.

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?

In early $2015$, Abercrombie & Fitch (ANF) had a book equity of $\$ 1390$ million, a price per share of $\$ 25.52$, and $69.35$ million shares outstanding. At the same time, The Gap (GPS) had a book equity of $\$ 2983$ million, a share price of $\$ 41.19$, and $421$ million shares outstanding.

a. What is the market-to-book ratio of each of these clothing retailers?

b. What conclusions can you draw by comparing the two ratios?

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.

a. Return on assets, or ROA, can be expressed as the product of two ratios. Which two?\

b. Return on equity, or ROE, can be expressed as the product of three ratios. Which three?

The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee's current capital structure calls for 40 percent debt, 30 percent preferred stock, and 30 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, $9.0$ percent; retained earnings, $10.0$ percent; and new common stock, $11.4$ percent. What is the initial weighted average cost of capital? (Include debt, preferred stock, and common equity in the form of retained earnings, $K_e$.)

A vacant lot acquired for $100,000 is sold for$350,000 in cash. What is the effect of the sale on the total amount of the seller’s (1) assets, (2) liabilities, and (3) owner’s equity?

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, $K_e$.)