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Thread: Anyone Do Well in Their Finance Class? I Need MAJOR Help!

  1. #1
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    Default Anyone Do Well in Their Finance Class? I Need MAJOR Help!

    Ok, I've done super well in ALL my classes so far and this is my last set before I graduate. I am FAILING my Finance class right now, though, because I'm having such a hard time. I'm super confused. Anyway, I was going to use my school's link for online tutoring, and the only time they have it available (except on weekends) is when I'm at work! I'm going to go this weekend, but I need help NOW! If anyone can help with the stuff I post past this...I will seriously uber love you and send you all my e-love and stuff!

    Please help me! I don't want to fail when I'm about to graduate (summa cum laude, at that)!

    Problem:
    Return on equity Midwest Packaging’s ROE last year was only 3 percent, but its management
    has developed a new operating plan that calls for a total debt ratio of 60 percent,
    which will result in annual interest charges of $300,000. Management projects an
    EBIT of $1,000,000 on sales of $10,000,000, and it expects to have a total assets turnover
    ratio of 2.0. Under these conditions, the tax rate will be 34 percent. If the changes are
    made, what will be its return on equity?

  2. #2
    Banned Katrine's Avatar
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    Default Re: Anyone Do Well in Their Finance Class? I Need MAJOR Help!

    Uuuuugh, I am great at finance, but my brain is totalyl fried right now honey. Can I look at if for you tomorrow?

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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    Default Re: Anyone Do Well in Their Finance Class? I Need MAJOR Help!

    Quote Originally Posted by Katrine View Post
    Uuuuugh, I am great at finance, but my brain is totalyl fried right now honey. Can I look at if for you tomorrow?
    Tomorrow...this weekend...whenever! I'm like 3 projects behind and I need to get them done ASAP! I'll do what I can and then ask whatever questions I have.

    I'm like a math retard or something.

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    Default Re: Anyone Do Well in Their Finance Class? I Need MAJOR Help!

    Its not that much math. You just need to organize your work through formulas, proportions, etc. Fortunately, all of my financial software does that for me now, but I know how to do this....2moro night. I have to go to Caldwell early, and just munching on dinner and surfing...

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  5. #5
    Sitri
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    Default Re: Anyone Do Well in Their Finance Class? I Need MAJOR Help!

    Quote Originally Posted by Deni View Post
    Ok, I've done super well in ALL my classes so far and this is my last set before I graduate. I am FAILING my Finance class right now, though, because I'm having such a hard time. I'm super confused. Anyway, I was going to use my school's link for online tutoring, and the only time they have it available (except on weekends) is when I'm at work! I'm going to go this weekend, but I need help NOW! If anyone can help with the stuff I post past this...I will seriously uber love you and send you all my e-love and stuff!

    Please help me! I don't want to fail when I'm about to graduate (summa cum laude, at that)!

    Problem:
    Return on equity Midwest Packaging’s ROE last year was only 3 percent, but its management
    has developed a new operating plan that calls for a total debt ratio of 60 percent,
    which will result in annual interest charges of $300,000. Management projects an
    EBIT of $1,000,000 on sales of $10,000,000, and it expects to have a total assets turnover
    ratio of 2.0. Under these conditions, the tax rate will be 34 percent. If the changes are
    made, what will be its return on equity?

    Well, if this had been two beers earlier, it would be easier.

    But from memory,
    You need to get the return which will now be 1,000,000 less interest of 300000=$700,000 before taxes.

    equity was 100% and now it will be 40% since 60% is now debt. We have to figure out the total old equity. Since it was 3% after tax, lets take it to before tax 3%(1-34% tax rate)=4%. So $1,000,000 profit was equal to 4%. So total equity was $25,000,000 before financing (i).

    Now, I guess this is one of those academic problems where we keep the same capitalization and somehow dividend 60% of our stock capitalization back to shareholders so poof, our capitalization becomes $10 mill in stock and $15 in debt. Being CEO, I get $1,000,000 for figuring this shit out.

    So, our ROE is now (1,000,000-300,000)/ 10,000,000)*.66 or 7%*.66 or 4.8% illustrating why you should leverage your ass off.

    Of course, this can be totally wrong.

    I have no idea what asset turnover has to do with this...

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    Default Re: Anyone Do Well in Their Finance Class? I Need MAJOR Help!

    Quote Originally Posted by Sitri View Post
    Return on equity Midwest Packaging’s ROE last year was only 3 percent, but its management
    has developed a new operating plan that calls for a total debt ratio of 60 percent,
    which will result in annual interest charges of $300,000. Management projects an
    EBIT of $1,000,000 on sales of $10,000,000, and it expects to have a total assets turnover
    ratio of 2.0. Under these conditions, the tax rate will be 34 percent. If the changes are
    made, what will be its return on equity?

    Well, if this had been two beers earlier, it would be easier.

    But from memory,
    You need to get the return which will now be 1,000,000 less interest of 300000=$700,000 before taxes.

    equity was 100% and now it will be 40% since 60% is now debt. We have to figure out the total old equity. Since it was 3% after tax, lets take it to before tax 3%(1-34% tax rate)=4%. So $1,000,000 profit was equal to 4%. So total equity was $25,000,000 before financing (i).

    Now, I guess this is one of those academic problems where we keep the same capitalization and somehow dividend 60% of our stock capitalization back to shareholders so poof, our capitalization becomes $10 mill in stock and $15 in debt. Being CEO, I get $1,000,000 for figuring this shit out.

    So, our ROE is now (1,000,000-300,000)/ 10,000,000)*.66 or 7%*.66 or 4.8% illustrating why you should leverage your ass off.

    Of course, this can be totally wrong.

    I have no idea what asset turnover has to do with this...
    Well...that makes more sense. Yeah, I hate this book and the problems. I can read the whole chapter and then the problems have NOTHING to do with what I just read. Very confusing. I'm doing ok on the stuff for this week, though.

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