F515 Week 2 Homework

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* Problems (pp. 165-167) * 4-1 FV of Single Amount * 4-2 PV of Single Amount * 4-6 FV of Ordinary Annuity * 4-13 a PV of an Annuity * 4-14 PV Uneven Cash Flow Stream Page 103 3-1 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. $20,000/365= 54.79 54.79 x 20 = $1,095.80 3-2 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 debt ratio? Equity ratio = 1/2.5 = .40 Debt ratio + equity ratio = 1 1-equity ratio = debt ratio 1-.40 = .60 or 60% 3-3 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? $75 x 800 = $60 billion Book value = $10 billion (total assets) - $4 billion (current liabilities + long-term debt) = $6 billion M/B ratio = $60 billion/ $6 billion = 10 3-4 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? Cash flow ratio x cash flow per share = price per share 8.0 x $3.00 = $24 price per share Price per share/EPS = P/E ratio $24/$1.50 = 16 3-5 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? ROE = (profit margin) x (total assets turnover) x (equity multiplier) (3%) x ($100 million/$50 million) x (2.0) = .24 or 24% 3-6 Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the

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