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Task1. HL and LL are identical firms excluding for their capital structures. Each has $20 million in assets, earned $4 million before interest and taxes in the year of 2012, and has a 40% marginal tax rate. Firm HL has a debt/ assets ratio of 50% and pays 12% interest on its debt, whereas LL has a 30% debt/ assets ratio and pays only 10% interest on debt. Compute the rate of return on equity for each firm.

Task2. Tim Urban, owner or manager of Urban Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy's Maid Service. Tim rents an average of 50 rooms for each of 365 nights (365 X 50 equals the total rooms rented for year (. Tim's cost to clean a room is $12.50. The Duffy's Maid Service quote is $18.50 per room additionally the fixed cost of $25,000 for sundry items such as uniforms with motel's name. Tim's yearly fixed cost offer space, equipment, and supplies are $61,000. Which is the preferred process for Tim, and Why?

Task3. In 2012, Jake's Jamming Music, Inc. announced the ROA of 8.51 percent, ROE of 14.00 percent, and profit margin of 11.5 percent. The firm had total assets of $9.0 million at year-end 2012.

a) Compute the 2012 value of net income accessible to common stockholders for Jake’s Jamming Music, Inc.

b) Compute the 2012 value of common stockholders’ equity for Jake’s Jamming Music, Inc.

c) Compute the 2012 value of net sales for Jake’s Jamming Music, Inc.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93600

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