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ID: 2440748 • Letter: E
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eviewView Tell me what you want to do... s Cut 111 a"a"-- Calibri 9- ?wrap Tet General Copy Format Painter 60 00 Condi Clipboard Format Font Alignment Number . Complete the R isted. You should show your work for potential full credit Remember Assets 20% of total assets. The projected Net incomes for the year for the 3 alter $398,560, and Option 3 $456,675 atio Calculation worksheet. You are computing the ratios listed for each of the 3 financing considerations show your work for potential full credit Remember Assets - Liabilities + Equity. Also Current Assets is natives are Option 1 $376,850, Option 2 6. Copy the Ratios from the Ratios tab to the Ratios formulas tab. Highlight the entire area and press the "ctri" key and th key. This will cause the formulas used to display instead of the numbers. Save your file with the formulas displayed 5. Complete the information requestion on the "choice & reasons" tab with your recommendation to the company as to which financing option they should pursue and why you feel that is the appropriate option. To be considered for full credit you will need to include at least 3 different (unique) reasons for why you recommend a particular financing option. (Referring to 3 different ratios is NOT 3 unique reasons. Ratios are ONE unique reason.) Your instructor and the lab tutors will not provide guidance on information related to your recommendation of a financing option or on your 3 UNIQUE reasons You will need to read the information in chapters 10 and 11 and possible investige other options to determine which financing option to 37 recommned and why 38 39 Each student must submit an ORIGINAL excel file to the appropriate project 3 assignment link in Canvas. While students are encouraged to work together, each student must process and formatExplanation / Answer
since in the question equity and current liabilities is not given
assumption taken on existing equity $1,00,000
current liabilities $25000$
assets = liabilities + equity
i.e. assets = longterm liabilities + current liabilities + equity
assets = 25,00,000 + 25,000 + 1,00,000 = 26,25,000 (for ALT 1)
= 20,00,000 + 25000 + 100000 = 21,25,000 (for ALT 2)
= 0 + 25000 + 2075000 = 2100000 (for ALT3)
based on the above
particulars ALT-1 ALT-2 ALT-3
Current ratio
a. current asset 525000 425000 420000
(20% of total asset)
b.current liability 25000 25000 25000
a/b 21TIMES 17TIMES 16.8TIMES
AMONG 3 ALT - 1 IS BENEFICIAL AS PER CURRENT RATIO
Debt to asset ratio
c.debt 2525000 2025000 25000
d.asset 2625000 2125000 2100000
c/d 0.9619 0.953 0.012
COMPARED TO DEBT RATIO ALT 3 IS BENEFICIAL SINCE IT IS HAVING MORE DEBT COVERAGE
return on equity
e. netincome 376850 398560 456675
f. total equitY 100000 100000 2100000
e/f 376.85% 398.56% 21.74%
alt 2 is beneficial since it is giving more return to equity return holders
return on asset
e/d 14.35% 18.75% 21.75%
when compared to all ALT 3 Is beneficial.
when compared to all alternatives alternative 3 took dominance 2 times. hence ALT 3 is preferred.
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