What do you think about the following statement. “I am going to receive $100 two years from now and $200 three years from now, so I am getting a $300 future value.” How could the two cash flows be compared or combined?
> Construct the DuPont ROA and ROE breakdowns for Lake of Egypt Marina, Inc.
> Dogs R Us reported a profit margin of 10.5 percent, total asset turnover of 0.75 times, debt-to-equity of 0.80 times, net income of $500,000, and dividends paid to common stockholders of $200,000. The firm has no preferred stock outstanding. What is Dogs
> You are thinking of investing in Nikki T’s, Inc. You have only the following information on the firm at year-end 2018: net income is $250,000, total debt is $2.5 million, and debt ratio is 55 percent. What is Nikki T’s ROE for 2018?
> You have the following information on Els’ Putters, Inc.: sales to working capital is 4.6 times, profit margin is 20 percent, net income available to common stockholders is $5 million, and current liabilities are $6 million. What is the firm’s balance of
> Financial analysts forecast Limited Brands’ (LTD) growth rate for the future to be 12.5 percent. LTD’s recent dividend was $0.60. What is the value of Limited Brands’ stock when the required return is 14.5 percent?
> Brenda’s Bar and Grill has current liabilities of $15 million. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda’s current ratio is 2.1 times. Calculate the value of inventory li
> 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?
> 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?
> Last year, Hassan’s Mad hatter, Inc. had an ROA of 7.5 percent, a profit margin of 12 percent, and sales of $25 million. Calculate Hassan’s Mad hatter’s total assets.
> If Silas 4-Wheeler, Inc. has an ROE of 18 percent, equity multiplier of 2, and a profit margin of 18.75 percent, what is the total asset turnover and the capital intensity?
> Dudley Hill Golf Club’s market-to-book ratio is currently 2.5 times and the PE ratio is 6.75 times. If Dudley Hill Golf Club’s common stock is currently selling at $22.50 per share, what is the book value per share and earnings per share?
> Suppose that the 2016 actual and 2017 projected financial statements for your firm are initially shown as follows. In these tables, sales are projected to rise by 18 percent in the coming year, and the components of the income statement and balance sheet
> 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 c
> You are considering a stock investment in one of two firms (Lots of Debt, Inc. and Lots of Equity, Inc.), both of which operate in the same industry. Lots of Debt, Inc. finances its $30 million in assets with $29 million in debt and $1 million in equity.
> Tiggie’s Dog Toys, Inc. reported a debt-to-equity ratio of 1.75 times at the end of 2018. If the firm’s total debt at year-end was $25 million, how much equity does Tiggie’s have on its balance sheet?
> Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 8 percent. Safeco’s recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent?
> Mr. Husker’s Tuxedos Corp. ended the year 2018 with an average collection period of 32 days. The firm’s credit sales for 2018 were $56.1 million. What is the year- end 2018 balance in accounts receivable for Mr. Husker’s Tuxedos?
> Tater and Pepper Corp. reported sales for 2018 of $23 million. Tater and Pepper listed $5.6 million of inventory on its balance sheet. Using a 365 day year, how many days did Tater and Pepper’s inventory stay on the premises? How many times per year did
> The top part of Ramakrishnan, Inc,’s 2018 and 2017 balance sheets is listed below (in millions of dollars). Calculate Ramakrishnan, Inc.’s current ratio, quick ratio, and cash ratio for 2018 and 2017. 2018 Current
> Last year, Marly Brown, Inc., reported an ROE of 20 percent. The firm’s debt-to-equity was 1.50 times, sales were $20 million, the capital intensity was 1.25 times, and dividends paid to common stockholders were $1,000,000. The firm has no preferred stoc
> You are considering investing in Dakota’s Security Services. You have been able to locate the following information on the firm: Total assets are $32 million, accounts receivable are $4.4 million, ACP is 25 days, net income is $4.66 million, and debt-to-
> Last year, K9 Webb Wear, Inc., reported an ROE of 20 percent. The firm’s debt ratio was 55 percent, sales were $20 million, and the capital intensity was 1.25 times. Calculate the net income and profit margin for K9 Webb Wear last year. This year, K9 Web
> Use the following information to complete the balance sheet below. Current ratio = 2.2 times Credit sales = $1,200m Average collection period = 60 days Inventory turnover = 1.50 times Total asset turnover = 0.75 times Debt ratio = 60%
> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using regression to estimate a trend? Year: 2012 2013 2014 2015 2016 Sales $1,500,000 $1,750,000 $1,700,000 $2,000,
> Use the following information to complete the balance sheet below. Current ratio = 2.5 times Profit margin = 10% Sales = $1,200m ROE = 20% Long-term debt to Long-term debt and equity = 55%
> Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2018.
> Annual dividends of Generic Electrical grew from $0.66 in 2012 to $1.03 in 2017. What was the annual growth rate?
> Spread the balance sheets and income statements of Lake of Egypt Marina, Inc. for 2018 and 2017.
> You have located the following information on Webb’s Heating & Air Conditioning: debt ratio is 54 percent, capital intensity ratio is 1.10 times, profit margin is 12.5 percent, and dividend payout ratio is 25 percent. Calculate the sustainable growth rat
> You are considering investing in Nuran Security Services. You have been able to locate the following information on the firm: total assets are $24 million, accounts receivable are $3.3 million, ACP is 25 days, net income is $3.5 million, and debt-to-equi
> Last year, Stumble-on-Inn, Inc., reported an ROE of 18 percent. The firm’s debt ratio was 55 percent, sales were $15 million, and the capital intensity was 1.25 times. Calculate the net income for Stumble-on-Inn last year.
> Leonatti Labs’ year-end price on its common stock is $15. The firm has a profit margin of 8 percent, total assets of $42 million, a total asset turnover ratio of 0.75, no preferred stock, and 3 million shares of common stock outstanding. Calculate the PE
> Leonatti Labs’ year-end price on its common stock is $35. The firm has total assets of $50 million, debt ratio of 65 percent, no preferred stock, and 3 million shares of common stock outstanding. Calculate the market-to-book ratio for Leonatti Labs.
> Rick’s Travel Service has asked you to help piece together financial information on the firm for the most current year. Managers give you the following information: sales are $8.2 million, total debt is $2.1 million, debt ratio is 40 percent, and ROE is
> Calculate the times interest earned ratio for LaTonya’s Flop Shops, Inc., using the following information. Sales are $1.5 million, cost of goods sold is $600,000, depreciation expense is $150,000, other operating expenses is $300,000, addition to retaine
> Suppose that Wall-E Corp. currently has the following balance sheet, and that sales for the year just ended were $7 million. The firm also has a profit margin of 27 percent, a retention ratio of 20 percent, and expects sales of $9 million next year. Fixe
> Tiggie’s Dog Toys, Inc., reported a debt-to-equity ratio of 1.75 times at the end of 2018. If the firm’s total assets at year-end were $25 million, how much of their assets are financed with debt and how much with equity?
> Annual dividends of ATTA Corp grew from $0.96 in 2005 to $1.76 in 2017. What was the annual growth rate?
> Use the following information to complete the balance sheet below. Sales are $8.8 million, capital intensity ratio is 2.10 times, debt ratio is 55 percent, and fixed asset turnover ratio is 1.2 times.
> Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times, inventory turnover ratio of 12 times, average collection period of 30 days, and credit sales of $64 million. Calculate the value of cash and marketable securities.
> In 2018, Jake’s Jamming Music, Inc. announced an ROA of 8.56 percent, ROE of 14.5 percent, and profit margin of 20.5 percent. The firm had total assets of $9.5 million at year-end 2018. Calculate the 2018 values of net income available to common stockhol
> Maggie’s Skunk Removal Corp.’s 2018 income statement listed net sales = $12.5 million, gross profit of $6.9 million, EBIT = $5.6 million, net income available to common stockholders = $3.2 million, and common stock dividends = $1.2 million. The 2018 year
> You are considering investing in Annie’s Eatery. You have been able to locate the following information on the firm: Total assets are $40 million, accounts receivable are $6.0 million, ACP is 30 days, net income is $4.75 million, debt-to-equity is 1.5 ti
> Listed below are the 2018 financial statements for Garners’ Platoon Mental Health Care, Inc. Spread the balance sheet and income statement. Calculate the financial ratios for the firm, including the internal and sustainable growth rates
> Would you prefer to have an investment earning 5 percent for 40 years or an investment earning 10 percent for 20 years? Explain.
> A $1,000 investment has doubled to $2,000 in 8 years because of a 9 percent rate of return. How much longer will it take for the investment to reach $4,000 if it continues to earn a 9 percent rate?
> Without making any computations, indicate which of each pair has a higher interest rate? a. $100 doubles to $200 in 5 years or 7 years. b. $500 increases in 4 years to $750 or to $800. c. $300 increases to $450 in 2 years or increases to $500 in 3 years.
> Suppose that Psy Ops Industries currently has the following balance sheet, and that sales for the year just ended were $5 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year
> A firm is expected to pay a dividend of $2.05 next year and $2.35 the following year. Financial analysts believe the stock will be at their price target of $110 in two years. Compute the value of this stock with a required return of 12 percent.
> How are present values affected by changes in interest rates?
> How are the present value and future value related?
> List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive? Why?
> Show how the Rule of 72 can be used to approximate the number of years to quadruple an investment.
> Oil prices have increased a great deal in the last decade. The table below shows the average oil price for each year since 1949. Many companies use oil products as a resource in their own business operations (like airline firms and manufacturers of plast
> Consider that you are the marketing manager of a firm. You need to have approximately 1 additional salesperson for every $10 million in sales. You currently have $50 million in sales and have 5 employees handling the sales accounts. In order to plan ahea
> What kind of returns might you expect in the stock market? One way to measure how the stock market has performed is to examine the rate of return of the S&P 500 Index. To see historical prices of the S&P 500 Index, go to Yahoo! Finance (finance.yahoo.com
> What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years?
> What annual rate of return is earned on a $1,000 investment when it grows to $1,800 in six years?
> A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years. Compute the value of this stock with a required return of 10 percent.
> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using regression to estimate a trend? //
> What is the value in year 15 of a $250 cash flow made in year 3 if interest rates are 11 percent?
> What is the value in year 10 of a $1,000 cash flow made in year 3 if interest rates are 9 percent?
> What is the value in year 4 of a $1,000 cash flow made in year 6 if interest rates are 8 percent?
> What is the value in year 3 of a $700 cash flow made in year 6 if interest rates are 10 percent?
> How many years (and months) will it take $2 million to grow to $5 million with an annual interest rate of 7 percent?
> Which cash flow would you rather pay, $425 today or $500 in two years if interest rates are 10 percent? Why?
> What would be more valuable, receiving $500 today or receiving $625 in three years if interest rates are 7 percent? Why?
> Consider a $5,000 deposit earning 10 percent interest per year for 10 years. What is the future value, how much total interest is earned on the original deposit, and how much is interest earned on interest?
> Consider a $2,000 deposit earning 8 percent interest per year for five years. What is the future value, and how much total interest is earned on the original deposit vs. how much is interest earned on interest?
> JP Morgan Chase Co. (JPM) has earnings per share of $3.53 and a P/E ratio of 13.81. What is the price of the stock?
> How long will it take $2,000 to reach $5,000 when it grows at 10 percent per year?
> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the average approach? Year: 2012 2013 2014 2015 2016 Sales $2,500,000 $3.750,000 $2.400,000 $2,000,000 $2,600
> Determine the interest rate earned on a $2,300 deposit when $2,900 is paid back in one year.
> Determine the interest rate earned on a $1,400 deposit when $1,800 is paid back in one year.
> Approximately what interest rate is earned when an investment doubles over 12 years?
> Approximately what interest rate is needed to double an investment over five years?
> Approximately how many years does it take to double a $500 investment when interest rates are 10 percent per year?
> Approximately how many years does it take to double a $100 investment when interest rates are 7 percent per year?
> Compute the present value of $5,000 paid in two years using the following discount rates: 8 percent in the first year and 7 percent in the second year.
> Compute the present value of $1,000 paid in three years using the following discount rates: 6 percent in the first year, 7 percent in the second year, and 8 percent in the third year.
> HiLo, Inc., doesn’t face any taxes and has $150 million in assets, currently financed entirely with equity. Equity is worth $7 per share, and book value of equity is equal to market value of equity. Also, let’s assume
> Explain what the efficient frontier is and why it is important to investors.
> Compute the present value of an $850 payment made in 10 years when the discount rate is 12 percent.
> What is the present value of a $1,500 payment made in nine years when the discount rate is 8 percent?
> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the average approach? Year: 2012 2013 2014 2015 2016 Sales $1,500,000 $1,750,000 $1,400,000 $2,000,000 $1,600
> What is the present value of a $200 payment in one year when the discount rate is 7 percent?
> What is the present value of a $350 payment in one year when the discount rate is 10 percent?
> A deposit of $750 earns interest rates of 9 percent in the first year and 12 percent in the second year. What would be the second year future value?
> Compute the value in 25 years of a $1,000 deposit earning 10 percent per year.
> How much would be in your savings account in eleven years after depositing $150 today if the bank pays 8 percent per year?
> What is the future value of $400 deposited for one year earning an interest rate of 9 percent per year?
> What is the future value of $500 deposited for one year earning a 8 percent interest rate annually.
> Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What’s the stock price?
> Show the time line for a $400 cash outflow today, a $518 cash inflow in year 3, and a 9 percent interest rate.
> Show the time line for a $500 cash inflow today, a $605 cash outflow in year 2, and a 10 percent interest rate.
> A deposit of $350 earns the following interest rates: • 8 percent in the first year, • 6 percent in the second year, and • 5.5 percent in the third year. What would be the third year future value?
> Suppose a firm has had the historic sales figures shown as follows. What would be the forecast for next year’s sales using the naïve approach? Year: 2012 2013 2014 2015 2016 Sales $2.500,000 $3.750,000 $2,400,000 $2,000
> You own $10,000 of Denny’s Corp stock that has a beta of 2.9. You also own $15,000 of Qwest Communications (beta = 1.5) and $5,000 of Southwest Airlines (beta = 0.7). Assume that the market return will be 11.5 percent and the risk-free rate is 4.5 percen
> At age 30 you invest $1,000 that earns 8 percent each year. At age 40 you invest $1,000 that earns 12 percent per year. In which case would you have more money at age 60?
> You are scheduled to receive a $500 cash flow in one year, a $1,000 cash flow in two years, and pay an $800 payment in three years. If interest rates are 10 percent per year, what is the combined present value of these cash flows?
