FINANCE 500-Hologram Corporation is a holding company

FINANCE 500-Hologram Corporation is a holding company

Subject: Business    / Finance   
Question

Problem 1

Hologram Corporation is a holding company with four main subsidiaries. The percentage of its business coming from each of the subsidiaries, and their respective betas, are as follows:

Subsidiary
    

Percentage of Business
    

Beta

Water Company
    

60%
    

.70

Cable Company
    

25%
    

.90

Real estate
    

10%
    

1.30

Technology companies
    

5%
    

1.50

    What is the company’s beta?
    Assume that the risk-free rate is 6% and that the market risk premium is 5%. What is the holding company’s required rate of return?

Problem 2

Surf Bicycles Inc. Will manufacture and sell 200,000 units next year. Fixed costs will total $500,000, and variable costs will be 60% of sales. The bicycles will sell for $200 each.

The firm wants to achieve a level of earnings before interest and taxes of $250,000. How many units must they sell to achieve that result?

Problem 3

Alpha Electronics has the following income statement:

Sales
    

400,000

Total variable costs
    

240,000

Contribution margin
    

160,000

Fixed costs
    

140,000

EBIT
    

20,000

Calculate the new EBIT and percent change, assuming:

    Sales increase by 20%
    Sales decrease by 20%

Problem 4

Given the following information:

Total asset turnover
    

2.0 times

Accounts receivable turnover
    

25 times

Fixed asset turnover
    

5 times

Inventory turnover (based on cost of goods sold)
    

5 times

Current ratio
    

2

Sales (all on credit)
    

$5,000,000

Cost of goods sold
    

70% of sales

Debt ratio
    

60%

Calculate:

Cash
    

Accounts receivable
    

Inventories
    

Net fixed assets
    

Total assets
    

Current liabilities
    

Long-term debt
    

Total liabilities
    

Common equity
    

Total liabilities and common equity
    

Problem 5

Given the following information:

Sales Growth Rate
    

25%

COGS / Sales
    

65%

Operating Expense / Sales
    

20%

Depreciation Expense (000)
    

$40

Interest Expense (000)
    

$10

Tax Rate
    

40%

Dividends (000)
    

$20

Calculate the following information for 20X1:

Income Statement (000)

20X0
    

20X1

Sales
    

1500
    

Cost of goods sold
    

975
    

Gross profit
    

525
    

Operating costs
    

300
    

Depreciation expense
    

40
    

Net Operating Profit
    

185
    

Interest Expense
    

10
    

Earnings Before Taxes
    

175
    

Taxes
    

70
    

Net Income
    

105
    

Dividends
    

$20
    

Addition to Retained Earnings
    

$85
    

Please show some form of work please. Explain how you attained your answer. Thank You.