Reference no: EM131221135

Questions

Part A -

Q1. Reno Revolvers has an EPS of $1.80, a cash flow per share of $4.50, and a price/cash flow ratio of 9.0. What is its P/E ratio? Round your answer to two decimal places.

Q2. ROE - Needham Pharmaceuticals has a profit margin of 4% and an equity multiplier of 2.3. Its sales are $100 million and it has total assets of $40 million. What is its Return on Equity (ROE)? Round your answer to two decimal places.

Q3. Du Pont Analysis - Gardial& Son has an ROA of 12%, a 3% profit margin, and a return on equity equal to 13%. What is the company's total assets turnover? Round your answer to two decimal places. What is the firm's equity multiplier? Round your answer to two decimal places.

Q4. Current and Quick Ratios - Ace Industries has current assets equal to $9 million. The company's current ratio is 3.0, and its quick ratio is 2.5.

What is the firm's level of current liabilities? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.

What is the firm's level of inventories? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000

Q5. Profit Margin and Debt Ratio

Assume you are given the following relationships for the Haslam Corporation:

Sales/total assets  2.5

Return on assets (ROA)  4%

Calculate Haslam's profit margin. Do not round intermediate calculations. Round your answer to two decimal places.

Calculate Haslam's liabilities-to-assets ratio. Do not round intermediate calculations. Round your answer to two decimal places.

Suppose half of Haslam's liabilities are in the form of debt. Calculate the debt-to-assets ratio. Do not round intermediate calculations. Round your answer to two decimal places.

Q6. Times-Interest-Earned Ratio

The Morris Corporation has $900,000 of debt outstanding, and it pays an interest rate of 10% annually. Morris's annual sales are $4.5 million, its average tax rate is 40%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 5 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio? Round intermediate calculations to two decimal places. Round your answer to two decimal places.

Q7. Balance Sheet Analysis

Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data:

Total assets turnover: 2.8

Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 22%

Total liabilities-to-assets ratio: 35%

Quick ratio: 1.15

Days sales outstanding (based on 365-day year): 28 days

Inventory turnover ratio: 6.0

Round your answers to the nearest whole dollar.

Round your answers to the nearest whole dollar.

Partial Income           Statement Information

                                   Sales    $ 

                                   Cost of goods sold $ 

Balance Sheet

Cash      $                                                                Accounts payable    $ 

Accounts receivable $   Long-term debt                $  50,000

Inventories         $                                                  Common stock         $ 

Fixed assets       $              Retained earnings           $  100,000

Total assets        $  400,000            Total liabilities and equity             $

Part B -

Q1. Find the present values of the following cash flow streams. The appropriate interest rate is 14%. Round your answers to the nearest cent. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 4 Tool Kit.)

Year       Cash Stream A   Cash Stream B

1                              $100       $300

2                              400          400

3                              400         400

4                              400         400

5                              300         100

a. Stream A $ 

Stream B $ 

b. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest cent.

Stream A $ 

Stream B $ 

Q2. Effective Rate of Interest

Find the interest rate (or rates of return) for each of the following situations. Round your answers to two decimal places.

You borrow $700 and promise to pay back $728 at the end of 1 year.

You lend $700 and receive a promise to be paid $728 at the end of 1 year.

You borrow $90,000 and promise to pay back $162,314 at the end of 8 years.

You borrow $10,000 and promise to make payments of $3,550 at the end of each year for 3 years.

Q3. Expected Rate of Return

Washington-Pacific (W-P) invests $2 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 9 years, at which time W-P plans to sell the forest at an expected price of $4 million. What is W-P's expected rate of return? Round your answer to two decimal places.

Q4. Effective Rate of Interest

A mortgage company offers to lend you $85,000; the loan calls for payments of $8,325 at the end of each year for 30 years. What interest rate is the mortgage company charging you? Round your answer to two decimal places.

Q5. Required Lump-Sum Payment

To complete your last year in business school and then go through law school, you will need $20,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $20,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 5.81% interest a sum of money that is sufficient to provide the 4 payments of $20,000 each. His deposit will be made today.

a. How large must the deposit be? Round your answer to the nearest cent.

b. How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent.

c. How much will be in the account immediately after you make the last withdrawal? Round your answer to the nearest cent. Enter "0" if required

Q6. Repaying a Loan

While Mary Corens was a student at the University of Tennessee, she borrowed $12,000 in student loans at an annual interest rate of 7.00%. If Mary repays $1,500 per year, how long (rounded up to the nearest year) will it take her to repay the loan?

Q7. Reaching a Financial Goal

You need to accumulate $10,000. To do so, you plan to make deposits of $1,800 per year - with the first payment being made a year from today - into a bank account that pays 6.78% annual interest. Your last deposit will be less than $1,800 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Round your answer up to the nearest whole number.

How large will the last deposit be? Round your answer to the nearest cent.

Q8. Present Value of a Perpetuity

What is the present value of a perpetuity of $700 per year if the appropriate discount rate is 7.86%? Round your answer to the nearest cent.

If interest rates in general were to double and the appropriate discount rate rose to 15.72%, what would its present value be? Round your answer to the nearest cent.