Gentech, Inc A)112
B)1

question 18

Multiple Choice

Gentech, Inc. is an integrated circuit (microchip) manufacturer based out of New Jersey. Its principal products include microprocessors and motherboard chipsets. Selected financial statement values for Gentech are shown in the table, below. What is the degree of financial leverage for Gentech given the change in earnings from Year 1 to Year 2? $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Gentech Inc. } \\\text { (\$000s) }\end{array} & & \\\hline & \text { Year 1 } & \text { Year 2 } \\\hline \text { EBIT } & \$ 9,000 & \$ 9,800 \\\hline \text { Interest } & 50 & 50 \\\hline \text { Pre-Tax Income } & 8,950 & 9,750 \\\hline \text { Taxes } & 2,900 & 3,100 \\\hline \text { Net Income } & 6,050 & 6,650 \\\hline \text { Shares } & & \\\text { Outstanding } & 14,500 & 14,500 \\\hline \text { EPS } & 0.4172 & 0.4586 \\\hline\end{array}$$

• A)1.12
• B)1.01
• C)0.67
• D)3.11
• E)1.54

Grasp the impact of the Charter of Rights and Freedoms on legislative and judicial actions.

Understand the principles of natural justice and procedural fairness in legal proceedings.

Know the methods and principles governing the enforcement of judgments and the remedies available in legal disputes.

Understand the concepts of vertical and horizontal product differentiation and their effects on consumer preferences.

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Definitions:

Cost of Equity

The return that investors require or expect to earn on their investment in a company's equity to compensate for the risk they undertake.

After-Tax Cost

The after-tax cost is the net cost of a transaction, investment, or other financial activity after taking into account the effect of taxes.

Debt-Equity Ratio

Measures a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Pre-Tax Cost

The expense or cost incurred by an entity before taxes have been deducted.