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b)Assume that Angostura is currently operating at fullcapacity.
All costs/expenses/income and net working capital vary directly withsales/revenue.Interest Expenses will remainunchanged.
The tax rate and the dividend pay-out ratiowill remainconstant.How much additional debt is required, if any, if no new equity is raised and sales/revenue are projected to increaseby10%
c) Pro forma statement
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- Lynch Corporation has a wholly owned subsidiary in Mexico (Lynmex) with two distinct and unrelated lines of business. Lynmex’s Small Appliance Division manufactures small household appliances such as toasters and coffeemakers at a factory in Monterrey, Nuevo Leon, and sells them directly to retailers such as Gigantes throughout Mexico. Lynmex’s Electronics Division imports finished products produced by Lynch Corporation in the United States and sells them to a network of distributors operating throughout Mexico.Lynch’s CFO believes that the two divisions have different functional currencies. The functional currency of the Small Appliance Division is the Mexican peso, whereas the functional currency of the Electronics Division is the U.S. dollar. The CFO is unsure whether to designate the Mexican peso or the U.S. dollar as Lynmex’s functional currency, or whether the subsidiary can be treated as two separate foreign operations with different functional currencies.RequiredSearch current…Indigo Inc. is a large multinational corporation with a number of subsidiaries located in countries all over the world. One of Indigo's subsidiaries, Sweet Ltd., sold a piece of manufacturing equipment to another one of Indigo's subsidiaries, Pharoah Inc. Indigo owned 80% of Sweet and 65% of Pharoah. The equipment had been on Sweet's books at a carrying value of $128,000, and had a fair market value of $153,850. Pharoah paid $132,800 for the equipment. Both Sweet and Pharoah were in the business of selling manufactured products to their customers; the sale of the equipment was considered to be outside the normal course of both businesses. Identify what value should be used by both Sweet and Pharoah to record the sale/purchase of the equipment. Sweet to record the sale/purchase of the equipment at $4 Pharoah to record the sale/purchase of the equipment at 2$Brisbane Company has recently diversified by taking over the operations of Darwin Company at a cost of P9,000,000. Darwin Company manufactures and sells a cleaning cloth called the "Superswipe" which was developed by highly trained and innovative research staff. The unique nature of the coating used on the "Superswipe" has resulted in Darwin company acquiring a significant share of the South African market. A recent expansion into the equatorial African market has proved successful. As a result of the takeover, Brisbane Company acquired the following assets and liabilities at fair value: Land Machinery Inventory Accounts receivable 3,500,000 2,000,000 1,800,000 700,000 Accounts payable 3,000,000 In addition, Darwin Company owned, but had not recognized, the following: Trademark - "Superswipe" with fair value of P1,000,000 Patent Formula for the special coating with fair value of P500,000 - The research staff of Darwin Company agreed to join the staff of Brisbane Company and will…
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- Telco Ltd. is a Danish telecom company that prepares consolidated financial statements in full compliance with IFRS 10. The company has expanded dramatically in Central Asia in recent years by investing in three units: K-Mobe, U-Mobe, and T-Mobe, supplying cellular service to customers in Kazakhstan, Uzbekistan, and Tajikistan, respectively. page 155Telco’s corporate investment policy is to take majority ownership stakes in overseas subsidiaries when possible, but to accept lower levels of ownership when majority ownership is not possible or practical. The investment structures of the three Central Asia units are as follows: Telco owns 45 percent of the voting shares of K-Mobe. The other shares are owned by local institutions: 30 percent are owned by an investment fund connected to the state-owned oil company, and 25 percent are owned by the municipal government of Almaty, Kazakhstan’s largest city. The legal documents establishing K-Mobe specify that Telco possesses the right to fill…Cloth plc is the parent of the enterprise and has a manufacturing subsidiary, Tweed Inc, which is based in the US. Tweed Inc purchases 60% of its manufacturing inputs from the parent company, and the remaining 40% from an unrelated New Zealand company Darwin Wools Limited. Tweed Inc sells 40% of its output to retailers in the Eurozone, 40% to retailers in the UK, and exports the remaining 20% to retailers in Canada. Tweed Inc is negotiating with their New Zealand supplier, Darwin Wools Limited, to purchase a consignment of wool. The order is for 1 million kilos of wool. Darwin Wools Limited has insisted that they receive New Zealand Dollars (NZ$). Tweed Inc agree to pay NZ$ 500,000 for the wool in 6 months’ time, though are concerned that the US$/NZ$ exchange rate might change adversely. The following market information is available: Current spot exchange rate US$1/ NZ$1.49 Forward rate (6 months) US$1/ NZ$1.42 NZ borrowing rate 2.00% p.a.…BetterCare Hospitals, Inc. operates a chain of hospitals throughout the United States. Th ecompany has been expanding by acquiring local hospitals. Its largest acquisition, that of Statewide Medical, was made in 2001 under the pooling of interests method. BetterCare complieswith US GAAP.BetterCare is currently forming a 50/50 joint venture with Supreme Healthcare underwhich the companies will share control of several hospitals. BetterCare plans to use the equitymethod to account for the joint venture. Supreme Healthcare complies with IFRS and will usethe proportionate consolidation method to account for the joint venture.Erik Ohalin is an equity analyst who covers both companies. He has estimated the jointventure’s fi nancial information for 2010 in order to prepare his estimates of each company’searnings and fi nancial performance. Th is information is presented in Exhibit 1. EXHIBIT 1 Selected Financial StatementForecasts for Joint Venture ($ Millions)Year ending 31 December…
- BetterCare Hospitals, Inc. operates a chain of hospitals throughout the United States. Th ecompany has been expanding by acquiring local hospitals. Its largest acquisition, that of Statewide Medical, was made in 2001 under the pooling of interests method. BetterCare complieswith US GAAP.BetterCare is currently forming a 50/50 joint venture with Supreme Healthcare underwhich the companies will share control of several hospitals. BetterCare plans to use the equitymethod to account for the joint venture. Supreme Healthcare complies with IFRS and will usethe proportionate consolidation method to account for the joint venture.Erik Ohalin is an equity analyst who covers both companies. He has estimated the jointventure’s fi nancial information for 2010 in order to prepare his estimates of each company’searnings and fi nancial performance. Th is information is presented in Exhibit 1. EXHIBIT 1 Selected Financial StatementForecasts for Joint Venture ($ Millions)Year ending 31 December…BetterCare Hospitals, Inc. operates a chain of hospitals throughout the United States. Th ecompany has been expanding by acquiring local hospitals. Its largest acquisition, that of Statewide Medical, was made in 2001 under the pooling of interests method. BetterCare complieswith US GAAP.BetterCare is currently forming a 50/50 joint venture with Supreme Healthcare underwhich the companies will share control of several hospitals. BetterCare plans to use the equitymethod to account for the joint venture. Supreme Healthcare complies with IFRS and will usethe proportionate consolidation method to account for the joint venture.Erik Ohalin is an equity analyst who covers both companies. He has estimated the jointventure’s fi nancial information for 2010 in order to prepare his estimates of each company’searnings and fi nancial performance. Th is information is presented in Exhibit 1. EXHIBIT 1 Selected Financial StatementForecasts for Joint Venture ($ Millions)Year ending 31 December…BetterCare Hospitals, Inc. operates a chain of hospitals throughout the United States. Th ecompany has been expanding by acquiring local hospitals. Its largest acquisition, that of Statewide Medical, was made in 2001 under the pooling of interests method. BetterCare complieswith US GAAP.BetterCare is currently forming a 50/50 joint venture with Supreme Healthcare underwhich the companies will share control of several hospitals. BetterCare plans to use the equitymethod to account for the joint venture. Supreme Healthcare complies with IFRS and will usethe proportionate consolidation method to account for the joint venture.Erik Ohalin is an equity analyst who covers both companies. He has estimated the jointventure’s fi nancial information for 2010 in order to prepare his estimates of each company’searnings and fi nancial performance. Th is information is presented in Exhibit 1. EXHIBIT 1 Selected Financial StatementForecasts for Joint Venture ($ Millions)Year ending 31 December…