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NEW QUESTION: 1
The Global Advertising Company had net income after interest but before taxes of $40,000 this year. The marginal tax rate is 40 percent, and the dividend payout ratio is 30 percent. The company can raise debt at a 12 percent interest rate. The last dividend paid by Global was $0.90. Global's common stock is selling for
$8.59 per share, and its expected growth rate in earnings and dividends is 5 percent. If Global issues new common stock, the flotation cost incurred will be 10 percent. Global plans to finance all capital expenditures with 30 percent debt and 70 percent equity. What is the break point due to retained earnings being used up?
A. $24,000
B. $17,000
C. $10,000
D. $56,000
E. $30,000
Answer: A
Explanation:
Explanation/Reference:
Explanation:
Calculate net income and retained earnings
EBT$40,000
Less: Taxes$16,000
NI$24,000
RE = 0.70($24,000) = $16,800.
Break point retained earnings:
BP(RE) = $16,800/0.70 = $24,000.

NEW QUESTION: 2
Scenario
Please read this scenario prior to answering the question ArchiSurance senior management; board members, customers and major stockholders
have long been concerned about disaster resiliency in light of the company's heavy reliance on a single data center. The data center is located in an area that is prone to flooding and earthquakes, according to expert assessments done by consultants retained for this purpose. In addition, the data center is located under a busy cafeteria, and water occasionally leaks through its ceiling.
To address these problems, ArchiSurance has developed a plan to move from its current data center to a pair of ready-to-use data centers in separate cities. The data center move is designed to reduce the risk of business interruption, reduce both planned and unplanned downtime for critical applications, and reassure ArchiSurance stakeholders. However, a number of limitations make the planned transition to the new data centers particularly challenging. A number of critical ArchiSurance applications cannot be offline for more than an hour, and any downtime for these application must only occur in certain four-hour windows each weekend. Also, the move cannot occur during quarterly or year-end closing periods in order to avoid interrupting critical processing. Fulfillment of these specific type of requirements will reduce the risk of business interruption from the data center move activities themselves.
ArchiSurance management has therefore planned a multi-phase data center transformation program. All of the activities in each phase are necessary to ensure a progression of stable and fully functional data center configurations. The first phase consists of detailed scheduling and planning to produce a comprehensive transformation plan that meets ArchiSurance timing and scheduling requirements. During the second phase, ArchiSurance is to contract for the hardware and software required for the new datacenters, as well for refunds for the hardware and software to be returned from the current data center once it is shut down. During the third phase, the new data centers are to be set up, and the new hardware and software are to be tested in parallel with what is already in production. The actual transition between the old and new data centers occurs in the fourth phase, and the fifth phase involves shutting down and dismantling the old data center, and returning its hardware and software for contracted refunds. Phases two through five are each to be initiated when specific conditions are met in the previous phase.
Refer to the Scenario
The head of IT has asked you to help her explain why ArchiSurance decided to transform its data center infrastructure. You must model the stakeholders, the motivations, and the influencing relationships between these motivations. You must also model the specific goals realized by the data center transformation program and the limitations within which this program must operate.
Which answer provides the best explanation?



A. Option C
B. Option A
C. Option B
D. Option D
Answer: B