FINA 355 #

Profit margin = .072 = Net income / Sales .072 = $189,000 / Sales Sales = $2,625,000 Credit sales are 80 percent of total sales, so: Credit sales = $2,625,000(.80) Credit sales = $2,100,000 Now we can find receivables turnover by: Receivables turnover = Credit sales / Accounts receivable Receivables turnover = $2,100,000 / $128,370 Receivables turnover = 16.36 times Days' sales in receivables = 365 days / Receivables turnover Days' sales in receivables = 365 / 16.36 Days' sales in receivables = 22.31 days

A company has net income of $189,000, a profit margin of 7.2 percent, and an accounts receivable balance of $128,370. Assuming 80 percent of sales are on credit, what is the company's days' sales in receivables?

Shareholders' equity = $450 + $610 - $380 = $680

A firm has common stock of 135, paid-in surplus of 270, total liabilities of 380, current assets of 450, and fixed assets of 610. What is the amount of the shareholders' equity?

PV Growing perpetuity = $1,200 / (.074 − .03) = $27,272.73

A trust has been established to fund scholarships in perpetuity. The next annual distribution will be $1,200 and future payments will increase by 3 percent per year. What is the value of this trust at a discount rate of 7.4 percent?

Change in net working capital = ($419 - $325) - ($398 - $285) = $-19

At the beginning of the year, a firm has current assets of 398 and current liabilities of 285. At the end of the year, the current assets were 419 and the current liabilities were 325. What is the change in net working capital?

Cash flow to creditors = $28 - ($250 - $290) = $68

At the beginning of the year, the long-term debt of a firm was 290 and total debt was 340. At the end of the year, long-term debt was 250 and total debt was 350. The interest paid was 28. What is the amount of the cash flow to creditors?

Enter 25*4 6.0/4 600 N I/Y PV PMT FV Solve for -30,974.82

Atlas Insurance wants to sell you an annuity which will pay you $600 per quarter for 25 years. You want to earn a minimum rate of return of 6.0 percent compounded quarterly. What is the most you are willing to pay as a lump sum today to buy this annuity?

EM = 1 + .47 = 1.47

Browning's has a debt-equity ratio of .47. What is the equity multiplier?

6800/.36=18888.89+6800= 25688

Cado Industries has total debt of $6,800 and a debt-equity ratio of .36. What is the value of the total assets?

Total equity = $6,800 / .36 = $18,889 Total assets = $6,800 + 18,889 = $25,689

Cado Industries has total debt of $6,800 and a debt-equity ratio of .36. What is the value of the total assets?

ROE = (PM)(TAT)(EM) ROE = (.045)(1.70)(1.65) ROE = .1262, or 12.62%

If Wilkinson, Inc., has an equity multiplier of 1.65, total asset turnover of 1.7, and a profit margin of 4.5 percent, what is its ROE?

We need to calculate the retention ratio to calculate the sustainable growth rate. The retention ratio is: b = 1 - .19 b = .81 Now we can use the sustainable growth rate equation to get: Sustainable growth rate = (ROE × b) / [1 - (ROE × b)] Sustainable growth rate = [.11(.81)] / [1 - .11(.81)] Sustainable growth rate = .0978, or 9.78%

If the Hunter Corp. has an ROE of 11 and a payout ratio of 19 percent, what is its sustainable growth rate?

Market value of the firm's equity = $1,440,000 + $434,000 + 1.2($373,000) + 1.00($207,000) + $10,400 - $1,400,000 = $1,139,000

Jake owns The Corner Market which he is trying to sell so that he can retire and travel. The Corner Market owns the building in which it is located. This building was built at a cost of $1,200,000 and is currently appraised at $1,440,000. The counters and fixtures originally cost $671,000 and are currently valued at $434,000. The inventory is valued on the balance sheet at $373,000 and has a retail market value equal to 1.2 times its cost. Jake expects the store to collect 100 percent of the $207,000 in accounts receivable. The firm has $10,400 in cash and has total debt of $1,400,000. What is the market value of the firm's equity?

Days' sales in inventory = 365 / ($393,500 / $61,200) = 56.77

Northern Industries has accounts receivable of $42,300, inventory of $61,200, sales of $544,200, and cost of goods sold of $393,500. How many days, on average, does it take the firm to sell its inventory?

Return on equity = (0.05 x $3,790)/[$3,350 x (1 - .41)] = 9.59 percent

Reliable Cars has sales of $3,790, total assets of $3,350, and a profit margin of 5 percent. The firm has a total debt ratio of 41 percent. What is the return on equity?

Return on equity = (0.05 x $4,050)/[$3,150 x (1 - .41)] = 10.9 percent

Reliable Cars has sales of $4,050, total assets of $3,150, and a profit margin of 5 percent. The firm has a total debt ratio of 41 percent. What is the return on equity?

NPV(6.5,-110000,{0,0,0,150000})= 6598.46

Stu can purchase a one-bedroom house near his college today for $110,000, including the cost of some minor repairs. He expects to be able to resell it in four years for $150,000 if he just puts a little effort into cleaning up the property. At a discount rate of 6.5 percent, what is the expected net present value of this purchase opportunity?

EAR = [1 + (.149 / 12)]12 - 1 = .1596, or 15.96%

Taylor's Hardware offers credit at an APR of 14.9 percent and compounds interest monthly. What is the actual rate of interest they are charging?

.40(363)-76=69

The Daily News had net income of $363 of which 40 percent was distributed to the shareholders as dividends. During the year, the company sold 76 worth of common stock. What is the cash flow to stockholders?

The sustainable growth is: Sustainable growth rate = ROE × b 1 - ROE × b where: b = Retention ratio = 1 - Payout ratio = .6 So: Sustainable growth rate = .150 × .6 1 - .150 × .6 Sustainable growth rate = .0989, or 9.89%

The Wintergrass Company has an ROE of 15 percent and a payout ratio of 40 percent. What is the company's sustainable growth rate?

e.09 −1.

The highest effective annual rate that can be derived from an annual percentage rate of 9% is computed as:

Additional tax = .34($100,000 - $80,700) + .39($80,700 + $22,200 - $100,000) = $7,693

The tax rates are as shown. Taxable Income Tax Rate 0 - 50,000 15% 50,001 - 75,000 25% 75,001 - 100,000 34% 100,001 - 335,000 39% Nevada Mining currently has taxable income of 80,700. How much additional tax will the firm owe if taxable income increases by 22,200?

ROA = (.051 × $418,000) / [(1 + .37)($224,400)] = .0693, or 6.93%

Uptowne Restaurant has sales of $418,000, total equity of $224,400, a tax rate of 34 percent, a debt-equity ratio of .37, and a profit margin of 5.1 percent. What is the return on assets?

This is a multi-step problem involving several ratios. The ratios given are all part of the DuPont Identity. The only DuPont Identity ratio not given is the profit margin. If we know the profit margin, we can find the net income since sales are given. So, we begin with the DuPont Identity: ROE = .14 = (Profit margin)(Total asset turnover)(Equity multiplier) = (PM)(S / TA)(1 + D/E) Solving the DuPont Identity for profit margin, we get: Profit margin = [(ROE)(TA)] / [(1 + D/E)(S)] Profit margin = [(.14)($2,935)] / [(1 + 1.30)( $6,319)] Profit margin = .0283 Now that we have the profit margin, we can use this number and the given sales figure to solve for net income: Profit margin = .0283 = Net income / Sales Net income = .0283($6,319) Net income = $178.65

Y3K, Inc., has sales of $6,319, total assets of $2,935, and a debt-equity ratio of 1.30. If its return on equity is 14 percent, what is its net income?

Enter 4×12 0.055/12 5,680 N I/Y PV PMT FV Solve for -132.1

You are borrowing $5,680 to buy a car. The terms of the loan call for monthly payments for 4 years at a 5.50 percent interest compounded monthly. What is the amount of each payment?

Enter 4 5 -1,450 N I/Y PV PMT FV Solve for 1,762.48 Simple interest = $1,390 + ($1,390 x .04 x 4) = $1,612.40 Annual compounding = $1,390 x (1.04)4 = $1,626.1 Difference = $1,626.1 - $1,612.40 = $13.70

You invested $1,450 in an account that pays 5 percent simple interest. How much more could you have earned over a 4-year period if the interest had compounded annually?