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Company Baldwin invested $32,300,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $19,960,880 at 11.6%

Company Baldwin invested $32,300,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $19,960,880 at 11.6% interest, and equity of $12,339,120. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true?
Select: 5
-Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $12,339,120, the difference between the investment $32,300,000 and the bond $19,960,880.
- On the Balance sheet, Long Term Debt changed by $19,960,880.
- On the Balance sheet, Plant & Equipment increased by $32,300,000.
- Depreciation increased by $2,153,333.
- Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.
- Cash went down by $32,300,000 when the plant was purchased.
- Cash was pulled from retained earnings to cover the $12,339,120 difference between the plant purchase and bond issue.
-

Cash went up when the Bond was issued by $19,960,880.

Q2 This year Baldwin achieved an ROE of 23.0%. Suppose next year the profit margin (Net Income/Sales) increases. Assuming sales, assets and financial leverage remain the same next year, what effect would you expect this action to have on Baldwin's ROE?
Select: 1
Baldwin ROE will increase.
Baldwin ROE will decrease.
Baldwin ROE will remain the same.

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