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Calculate the financial leverage of auburn

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Reference no: EM132706508

At the end of the current year, Auburn Inc. reported the following information:

Sales$250,000

Operating income$72,000

Average total assets$400,000

Average stockholders' equity$125,000

Problem 1: Calculate the financial leverage of Auburn. (Round the answer to one decimal place.)

a. 3.2 times
b. 4.5 times
c. 2.4 times
d. 1.4 times

Problem 2: Which of the following is a disadvantage of the net present value method?

a. It cannot rank projects with equal lives.
b. It does not directly consider the expected cash flows from the proposal.
c. It does not consider the time value of money concept.
d. It assumes that cash flows can be reinvested at the minimum desired rate of return.

Problem 3: When annual net cash inflows are equal, the cash payback period is computed as:

a. Annual net cash inflow ÷ Life of investment.
b. Annual net cash inflow ÷ Depreciation per year.
c. (Initial cost - Annual net cash inflow) × Life of investment.
d. Initial cost ÷ Annual net cash inflow.

Reference no: EM132706508

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