question archive 1) In May 2017, Apple Inc
1) In May 2017, Apple Inc
Subject:AccountingPrice:4.87 Bought7
1) In May 2017, Apple Inc. notified the Securities & Exchange Commission (SEC) that it would be issuing another $7 billion in bonds during 2017. Apple previously issued $10 billion in bonds in February 2017 in the US and $1 billion in Taiwan. Apple plans to buy back its own stock with the proceeds from the bond issue. Answer the following questions: What are the effects of this most recent bond issue on Apple's balance sheet? Will any other parties be affected by this most recent bond issue? If so, who will be affected and what are the potential effects? Besides issuing bonds, what other ways could Apple use to raise the funds needed to buy back its own stock?
2) A marketer who has unit costs of $16 and wants to earn a 20 percent markup on sales. How much should the markup price be?
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Answer:
1.
If Apple issues bonds of $7 billion then it would increase both the Assets &Liabilities figures by the same amount of $7 billion. In the liabilities side, the long term loans would cover the Bonds payable & underthe asset side, the balance of Bank amount will be increased by $7 billiom
Since the company would have to incur incremental expenses in form of interest on the new bonds issued, this will impact the equityshareholders of the company as it will effect the net profits& Earnings Per Share.
Besides issuing the bonds, the company can issues Preference shares & use the amount received from it tobuy back its own equity shares. Also,the company can utilise the retained earnigs balance to buy back its own shares.
2.
from the given information
S=C+0.2S
S=selling price
C=cost
0.2 is markup
C=S-0.2S=0.8S
0.8S=C
S=C/0.8
S=16/0.8
S=20
the selling price is $20
