Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Blue Hamster has 10,000 shares of preferred stock

image text in transcribed

Given the results of the previous income statement calculations, complete the following statements:

In Year 2, if Blue Hamster has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive ($30, $22.50, $37.50, $15) in annual dividends.
If Blue Hamster has 200,000 shares of common stock issued and outstanding, then the firms earnings per share (EPS) is expected to change from ($27.90, $31, $16.24, $15.99) in Year 1 to ($20.27, $33.79, $39.75, $19.52) in Year 2.
Blue Hamsters earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from ($7,000,000, $9,458,000, $19,200,000, $8,432,000) in Year 1 to ($26,192,500, $20,304,500, $8,750,000, $12,004,500) in Year 2.
It is (incorrect/correct) to say that Blue Hamsters net inflows and outflows of cash at the end of Years 1 and 2 are equal to the companys annual contribution to retained earnings, $2,361,000 and $2,890,875, respectively. This is because (all/all but one) of the items reported in the income statement involve payments and receipts of cash.

Consider the following scenario: Blue Hamster Manufacturing Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next year. 1. Blue Hamster is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company's operating costs (excluding depreciation and amortization) remain at 65% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Blue Hamster expects to pay $150,000 and $1,013,625 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar whole dollar

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance For IT Decision Makers

Authors: Michael Blackstaff

1st Edition

3540762329, 978-3540762324

More Books

Students also viewed these Finance questions

Question

23. What are the effects of cannabinoids on neuronspg78

Answered: 1 week ago

Question

=+ (c) Show that a ,, converges to some a > 0.

Answered: 1 week ago

Question

Excel caculation on cascade mental health clinic

Answered: 1 week ago