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vii Blair Company has s5 mllon debt and s4 maion of common equity. The in total assets companys assets are financed with $1 milon of company's income statement is summarizod below $1.000.000 Eamings before taxes (EBT s 900,000 The company wants toincrease assetsby s1 milion, and itplans to finanon this increase by issuing s1 milion in new debt This action wil double the companys interest expense but ts operating income wil remain at 20 percent of its total assets, and is average tax rate will remain at 40 percent rthe company takes this action, which of the folowing wil ocour a. The company's net income will increase. The company's retum on assets will fall The companys retum on equity wil remainthe same Statements a and bare oomect e All of the statements above are comoot. Solo Company has been depreciating its fuced assets over 15 years is now dearthat these assets wil only last a total of 10 years Solo's accountants have encouraged the fim to revise its annual depreciation to refoct this new information Which of the following would occur as a result of this change? The company's eamings per share would decrease. b The company's cash position would increase The company's EBIT would increase Statements a and b are correct All of the statements above are correct, x Strack Houseware Supplies Inc. has $2 billion in total assets. The other side of its balance sheet consists of 302 blion in current labites, $06 billion in long-tem debt, and S12 billion in common equity. The company has 300 milion shares of common stock outstanding, and its stock price is $20 per shara. What is Strack's marketbook ratio? 3.15 xi The CFO of Mulroney Brothers has suggested that the company should issue $300 million worth of common stock and use the proceeds to reduce some of the company's outstanding debt. Assume that tho company adopts this poicy, and that total assets and operating income (EBIT remain the same. The companys tax rate wil also remain the same. Which of the a. The company's net income will increase b. The company's taxable income wll fall c. The company will pay less in taxes. d Statements bandcare correct. e. All of the statements above are correct. xi Pepsi Corporation's cument ratio is 0.5, while Coke Company's current ratio is 1.5. Both firms want to window dress' their coming end-of year financial statements As part of its window dressing strategy, each fim wil double its current liabilities by adding short-tem debt and placing the funds obtained in the cash account Which of the statements below best desaibes the actual results of these transactions a The transactions will have no effect on the current ratios. The current ratios of both firms will be increased c The current ratios of both firms wil be decreased d Only Pepsi Corporation's current ratio wil be ncreased e. Only Coke Company's cument ratio will be increased