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HW-407 FIN515 Homework2 Part-1
(3-1) Days Sales Outstanding
Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.
(3-2) Debt Ratio
Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debtratio?
(3-3) Market/Book Ratio
Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio?
(3-4) Price/Earnings Ratio
A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?
(3-5) ROE
Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.0. Its sales are $100 million and it has total assets of $50 million. What is its ROE?
Intermediate Problems 6-10
(3-6) Du Pont Analysis
Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier?
(3-7) Current and Quick Ratios
Ace Industries has current assets equal to $3 million. The company’s current ratio is 1.5, and its quick ratio is 1.0. What is the f
(Brigham 112-113)
–8
(4-1) Future Value of a Single Payment
If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?
(4-2) Present Value of a Single Payment
What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annuall
l?
(4-6) Future Value: ordinary Annuity versus Annuity Due
What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value b
e.
(4-13) Present Value of an Annuity
Find the present value of the following ordinary annuities (see the Notes to Problem 4-12).
a. $400 per year for 10 years at 10%
b. $200 per year for 5 years at 5%
c. $400 per year for 5 years at 0%
d. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.
(4-14) Uneven Cash Flow Stream
Find the present values of the following cash flow streams. The appropriate interest rate is 8%. (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
b. What is the value of each cash flow stream at a 0% interest rate
Answer will be sent by email.
Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.
(3-2) Debt Ratio
Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debtratio?
(3-3) Market/Book Ratio
Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio?
(3-4) Price/Earnings Ratio
A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?
(3-5) ROE
Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.0. Its sales are $100 million and it has total assets of $50 million. What is its ROE?
Intermediate Problems 6-10
(3-6) Du Pont Analysis
Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier?
(3-7) Current and Quick Ratios
Ace Industries has current assets equal to $3 million. The company’s current ratio is 1.5, and its quick ratio is 1.0. What is the f
(Brigham 112-113)
–8
(4-1) Future Value of a Single Payment
If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?
(4-2) Present Value of a Single Payment
What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annuall
l?
(4-6) Future Value: ordinary Annuity versus Annuity Due
What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value b
e.
(4-13) Present Value of an Annuity
Find the present value of the following ordinary annuities (see the Notes to Problem 4-12).
a. $400 per year for 10 years at 10%
b. $200 per year for 5 years at 5%
c. $400 per year for 5 years at 0%
d. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.
(4-14) Uneven Cash Flow Stream
Find the present values of the following cash flow streams. The appropriate interest rate is 8%. (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
b. What is the value of each cash flow stream at a 0% interest rate
Answer will be sent by email.
