CH3 Finance (quiz, hw, and practice probs)
Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 15.8% and a dividend payout ratio of 40.7%. What is the sustainable growth rate? 9.37% 34.27% 24.90% 10.34%
10.34%
Internal Growth Rate Last year Umbrellas Unlimited Corporation had an ROA of 10.8% and a dividend payout ratio of 49.2%. What is the internal growth rate? 116.64% 1% 5.8% 2.49%
5.8%
In 2015, Jake's Jamming Music, Inc., announced an ROA of 8.61 percent, ROE of 15.00 percent, and profit margin of 17.5 percent. The firm had total assets of $10.0 million at year-end 2015. Calculate the 2015 value of net income available to common stockholders for Jake's Jamming Music, Inc. (Enter your answers in dollars not in millions and round to the nearest whole dollar.)
Answer a. ROA = 8.61% Total Assets = $10,000,000 ROA = Net Income / Total Assets 8.61% = Net Income / $10,000,000 Net Income = $861,000 Answer b. ROE = 15.00% Net Income = $861,000 ROE = Net Income / Common Stockholders' Equity 15.00% = $861,000 / Common Stockholders' Equity Common Stockholders' Equity = $5,740,000 Answer c. Profit Margin = 17.5% Net Income = $861,000 Profit Margin = Net Income / Net Sales 17.5% = $861,000 / Net Sales Net Sales = $4,920,000
Use the following financial statements for Lake of Egypt Marina, Inc.
Balance sheet Assets Liabilities and Equity Current assets: Current liabilities: Cash and marketable securities $ 40 $ 36 Accrued wages and taxes $ 45 $ 33 Accounts receivable 45 33 Accounts payable 40 27 Inventory 208 84 Notes payable 35 24 Total $ 293 $ 153 Total $ 120 $ 84 Fixed assets: Long term debt: $ 211 $ 117 Gross plant and equipment $ 260 $ 168 Stockholders' equity: Less: Depreciation 78 39 Preferred stock (3 million shares) $ 3 $ 3 Common stock and paid-in surplus (18 million shares) 18 18 Net plant and equipment $ 182 $ 129 Retained earnings 148 78 Other long-term assets 25 18 Total $ 207 $ 147 Total $ 169 $ 99 Total assets $ 500 $ 300 Total liabilities and equity $ 500 $ 300 Income statement Net sales (all credit) $ 650 $ 450 Less: Cost of goods sold 390 261 Gross profits $ 260 $ 189 Less: Other operating expenses 52 36 Earnings before interest, taxes, depreciation, and amortization (EBITDA) $ 208 $ 153 Less: Depreciation 39 27 Earnings before interest and taxes (EBIT) $ 169 $ 126 Less: Interest 39 36 Earnings before taxes (EBT) $ 130 $ 90 Less: Taxes 39 27 Net income $ 91 $ 63 Less: Preferred stock dividends $ 3 $ 3 Net income available to common stockholders $ 88 $ 60 Less: Common stock dividends 18 18 Addition to retained earnings $ 70 $ 42 Per (common) share data: Earnings per share (EPS) $ 4.890 $ 3.330 Dividends per share (DPS) $ 1.000 $ 1.000 Book value per share (BVPS) $ 9.220 $ 5.330 Market value (price) per share (MVPS) $ 15.600 $ 13.400 Construct the DuPont ROA and ROE breakdowns for Lake of Egypt Marina, Inc. (Do not round intermediate calculations. Round your answers to 2 decimal places.) DuPont Analysis ROA 17.60 correct % ROE 52.07 correct %
You are considering an investment in Roxie's Bed & Breakfast Corp. During the last year, the firm's income statement listed an addition to retained earnings of $16.80 million and common stock dividends of $1.20 million. Roxie's year-end balance sheet shows common stockholders' equity of $57.0 million with 20 million shares of common stock outstanding. The common stock's market price per share was $8.00. What is Roxie's Bed & Breakfast's book value per share? (Round your answer to 2 decimal places.) Book value per share $ What is Roxie's Bed & Breakfast's earnings per share? (Round your answer to 2 decimal places.) Earnings per share $ Calculate the market-to-book ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Market-to-book ratio times Calculate the price-earnings ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price-earnings ratio times
Book value per share $ 2.85 What is Roxie's Bed & Breakfast's earnings per share? (Round your answer to 2 decimal places.) Earnings per share $ 0.9 Calculate the market-to-book ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Market-to-book ratio 2.81 times Calculate the price-earnings ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price-earnings ratio 8.89 times
You are considering an investment in Roxie's Bed & Breakfast Corp. During the last year, the firm's income statement listed an addition to retained earnings of $4.8 million and common stock dividends of $2.2 million. Roxie's year-end balance sheet shows common stockholders' equity of $35 million with 10 million shares of common stock outstanding. The common stock's market price per share was $9.00. What is Roxie's Bed & Breakfast's book value per share? (Round your answer to 2 decimal places.) Book value per share $ What is Roxie's Bed & Breakfast's earnings per share? (Round your answer to 2 decimal places.) Earnings per share $ Calculate the market-to-book ratio. (Round your answer to 2 decimal places.) Market-to-book ratio times Calculate the price-earnings ratio. (Round your answer to 2 decimal places.) Price-earnings ratio times
Book value per share = COmmon Equity/No of shares outstanding 3.50 Earnings per share = Net Income/No of shares outstanding 0.70 Market-to-book ratio = Mkt Value pe share/Book valyue oer share 2.57 Price-earnings ratio = Price per share/EPS 12.86
You are considering an investment in Roxie's Bed & Breakfast Corp. During the last year, the firm's income statement listed an addition to retained earnings of $9.00 million and common stock dividends of $2.90 million. Roxie's year-end balance sheet shows common stockholders' equity of $42.7 million with 17 million shares of common stock outstanding. The common stock's market price per share was $9.50
Book value per share = Common Equity/No of shares outstanding=2.51 Earnings per share = Net Income/No of shares outstanding =0.7 Market-to-book ratio = Mkt Value pe share/Book value per share =3.78 Price-earnings ratio = Price per share/EPS =13.57 Book value per share = $42.7m / 17m = $2.51 per share Earnings per share = ($9.00m + $2.9m) / 17m = $0.70 per share Market-to-book ratio=9.5/2.51 Price earnings ration9.50/.70
Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars) 2015 2014 2015 2014 Assets Liabilities and Equity Current assets: Current liabilities: Cash and marketable securities $ 45 $ 36 Accrued wages and taxes $ 40 $ 20 Accounts receivable 40 32 Accounts payable 35 24 Inventory 223 148 Notes payable 30 32 Total $ 308 $ 216 Total $ 105 $ 76 Fixed assets: Long term debt: 67 200 Gross plant and equipment $ 255 $ 200 Stockholders' equity: Less: Depreciation 88 40 Preferred stock (4 million shares) $ 4 $ 4 Common stock and paid-in surplus (16 million shares) 16 16 Net plant and equipment $ 167 $ 160 Retained earnings 308 104 Other long-term assets 25 24 Total $ 192 $ 184 Total $ 328 $ 124 Total assets $ 500 $ 400 Total liabilities and equity $ 500 $ 400 LAKE OF EGYPT MARINA, INC. Income Statement for Years Ending December 31, 2015 and 2014 (in millions of dollars) 2015 2014 Net sales (all credit) $ 800 $ 600 Less: Cost of goods sold 320 192 Gross profits $ 480 $ 408 Less: Other operating expenses 64 36 Earnings before interest, taxes, depreciation, and amortization (EBITDA) 416 372 Less: Depreciation 48 30 Earnings before interest and taxes (EBIT) $ 368 $ 342 Less: Interest 48 42 Earnings before taxes (EBT) $ 320 $ 300 Less: Taxes 96 90 Net income $ 224 $ 210 Less: Preferred stock dividends $ 4 $ 4 Net income available to common stockholders $ 220 $ 206 Less: Common stock dividends 16 16 Addition to retained earnings $ 204 $ 190 Per (common) share data: Earnings per share (EPS) $ 13.750 $ 12.875 Dividends per share (DPS) $ 1.000 $ 1.000 Book value per share (BVPS) $ 20.250 $ 7.500 Market value (price) per share (MVPS) $ 15.100 $ 12.900
Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2015. (Use sales when computing the inventory turnover and use common stockholders' equity when computing the equity multiplier. Round your answers to 2 decimal places. Use 365 days a year.) a. Current ratio 2.93 correct times b. Quick ratio 0.81 correct times c. Cash ratio 0.43 correct times d. Inventory turnover 1.43 incorrect times e. Days' sales in inventory 84.63 incorrect days f. Average collection period 18.25 correct days g. Average payment period 39.92 correct days h. Fixed asset turnover 3.64 incorrect times i. Sales to working capital 3.94 correct times j. Total asset turnover 1.60 correct times k. Capital intensity 0.63 correct times l. Debt ratio 34.40 correct % m. Debt-to-equity .52 correct times n. Equity multiplier 1.52 correct times o. Times interest earned 6.67 incorrect times p. Cash coverage 8.67 correct times q. Profit margin 28.00 incorrect % r. Gross profit margin 60.00 correct % s. Operating profit margin 46.00 correct % t. Basic earnings power 73.60 correct % u. ROA 44.80 incorrect % v. ROE 67.07 incorrect % w. Dividend payout 7.27 correct % x. Market-to-book ratio .75 correct times y. PE ratio 1.10 correct times
You are evaluating the balance sheet for PattyCake's Corporation. From the balance sheet you find the following balances: cash and marketable securities = $380,000; accounts receivable = $1,240,000; inventory = $2,140,000; accrued wages and taxes = $520,000; accounts payable = $820,000; and notes payable = $640,000.
Current ratio 1.90 times Calculate PattyCakes' quick ratio. (Round your answer to 2 decimal places.) Quick ratio 0.82 times Calculate PattyCakes' cash ratio. (Round your answer to 2 decimal places.) Cash ratio 0.19 times Current ratio=$380,000 + $1,240,000 + $2,140,000 /$520,000 + $820,000 + $640,000=1.90 Quick ratio (acid-test ratio)=($380,000 + $1,240,000 + $2,140,000) - $2,140,000/$520,000 + $820,000 + $640,000=.82 Cash ratio=380,000/$520,000 + $820,000 + $640,000 =.19
You are evaluating the balance sheet for PattyCake's Corporation. From the balance sheet you find the following balances: cash and marketable securities = $480,000; accounts receivable = $1,040,000; inventory = $1,940,000; accrued wages and taxes = $420,000; accounts payable = $720,000; and notes payable = $440,000. Calculate PattyCakes' current ratio. (Round your answer to 2 decimal places.) Current ratio times Calculate PattyCakes' quick ratio. (Round your answer to 2 decimal places.) Quick ratio times Calculate PattyCakes' cash ratio. (Round your answer to 2 decimal places.) Cash ratio times
Current ratio = current assets / current liabilities = ( 480000 + 1040000+1940000)/ (420000 + 720000+440000) = 3460000 / 1580000 = 2.19 Quick ratio = (3460000 - 1940000) / 1580000 = 0.96 Cash ratio = 480000 / 1580000 = .30
Tater and Pepper Corp. reported sales for 2015 of $39 million. Tater and Pepper listed $7.2 million of inventory on its balance sheet. How many days did Tater and Pepper's inventory stay on the premises? (Use 365 days a year. Round your answer to 2 decimal places.)
Days' sales in inventory 67.38 days Inventory turnover 5.42 times Days' sales in inventory =$7.2m × 365/39m=67.38 inventory turnover=39m/7.2m=5.42
Tater and Pepper Corp. reported sales for 2015 of $23 million. Tater and Pepper listed $5.6 million of inventory on its balance sheet. How many days did Tater and Pepper's inventory stay on the premises? (Use 365 days a year. Round your answer to 2 decimal places.) Days sales in inventory days How many times per year did Tater and Pepper's inventory turn over? (Round your answer to 2 decimal places.) Inventory turnover times
Days' sales in inventory = (5.6*365)/23 = 88.8696 days Inventory turnover ratio = 23/5.6 = 4.1071 days
Last year, Lakesha's Lounge Furniture Corporation had an ROA of 7.2 percent and a dividend payout ratio of 27 percent. What is the internal growth rate?
Internal Growth Rate = (ROA * b) / 1 - (ROA * b) 5.55% Internal growth rate=0.072x(1-.27)/1 - [0.072 × (1 - 0.27)]
Last year, Hassan's Madhatter, Inc., had an ROA of 7.5 percent, a profit margin of 12 percent, and sales of $25 million. Last year, how much did Hassan's Madhatter, Inc. have in total assets? (Enter your answer in millions.) Total assets $ m
Profit margin = Net income/sales 12% = Net income/$25 million Net income = $3 million ROA = Net income/Total assets 7.50% = $3 million/Total assets Total assets = $40 million. ROA = 0.075 = (0.12 × $25m) / Total assets) => Total assets = (0.12 × $25m) / 0.075 = $40m
In 2015, Jake's Jamming Music, Inc., announced an ROA of 8.60 percent, ROE of 14.90 percent, and profit margin of 18.1 percent. The firm had total assets of $9.9 million at year-end 2015. Calculate the 2015 value of net income available to common stockholders for Jake's Jamming Music, Inc. (Enter your answers in dollars not in millions and round to the nearest whole dollar.) Net income $ Calculate the 2015 value of common stockholders' equity for Jake's Jamming Music, Inc. (Round your answer to the nearest dollar amount.) Common stockholders' equity $ Calculate the 2015 value of net sales for Jake's Jamming M
ROA = Net income / Total assets 0.0860 = Net income / 9900000 Net income = $851400 ROE = Net income / Total common stockholder's equity 0.1490 = 851400 / Total common stockholder's equity Total common stockholder's equity = $5714094 Profit margin = Net income / Sales 0.181 = 851400 / Sales Sales = $4703867
Last year, Lakesha's Lounge Furniture Corporation had an ROA of 7.5 percent and a dividend payout ratio of 25 percent. What is the internal growth rate?
ROA*b / (1-ROA*b) where b = retention ratio = 1-dividend payout ratio Hence, Internal growth rate = ROA*(1-dividend payout ratio) / (1-ROA*(1-dividend payout ratio)) = 7.5%*75%/ (1-7.5%*75%) = Hence, Internal growth rate = 5.96% Internal growth rate=0.075 × (1 - 0.25)/1 - [0.075 × (1 - 0.25)]
Last year Lakesha's Lounge Furniture Corporation had an ROE of 18.0 percent and a dividend payout ratio of 23 percent. What is the sustainable growth rate? What is the sustainable growth rate?
Retention rate=1-dividend payout rate Sustainable growth rate=(ROE*Retention rate)/[1-(ROE*Retention rate)] =16.09 Sustainable growth rate=0.180 × (1 - 0.23)/1- [0.180 × (1 - 0.23)]
Last year, Hassan's Madhatter, Inc., had an ROA of 8 percent, a profit margin of 14.08 percent, and sales of $25 million. Calculate Hassan's Madhatter's total assets.
Return on Assets (ROA) = Net income / Total assets Net Income is 14.08% on sales Sales = 25 million Net Income = 14.08% of 25 million Net Income = 3.52 million Return on Assets (ROA) = Net Income / Total Assets 0.08 = 3.52 / Total Assets Total Assets = 44 Million ROA = 0.08 = (0.1408 × $25m) / Total assets) => Total assets = (0.1408 × $25m) / 0.08 = $44m
Last year Lakesha's Lounge Furniture Corporation had an ROE of 17.5 percent and a dividend payout ratio of 20 percent. What is the sustainable growth rate? What is the sustainable growth rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Sustainable growth rate
sustainable growth rate = ROE x (1 - dividend-payout ratio) =16.28 Sustainable growth rate=0.175 × (1 - 0.20)/1- [0.175 × (1 - 0.20)]