Question #1

Using the Starbucks financial statements provided on Blackboard, calculate and interpret the current liabilities ratios (including cash cycle) we discussed in class. Assume 20% of all sales are credit sales.

 

Question #2

Using the Starbucks financial statements provided on Blackboard, calculate and interpret the long-term liabilities ratios we discussed in class. 

 

Question #3

You are the controller of a firm whose CEO believes that debt should always be used to finance long-term expenditures because interest is tax deductible. List and describe other benefits to debt financing. Also, list and describe risks to using debt.

 

Question #4

a)    Given the following information, calculate the firm’s WACC:

 

Tax rate:                                             30%

Debt rate:                                           6%

Preferred stock dividend rate:            10% of $100 par value

Risk-free rate of return:                     2%

Market rate of return:                        14%

Stock beta:                                         1.2

Debt value:                                         $50,000,000

P/S value:                                           $15,000,000

C/S value:                                           $35,000,000

 

b)   What would a firm use the WACC for? 

• 1499750314-HW 5 information.xls

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Status NEW Posted 11 Jul 2017 05:07 AM My Price 7.00

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