100+1000-850/12/1000+850/2 = 112.5/925 = .1216 or 12.16% • 5-6 Maturity Risk Premium The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.3%. What is the maturity risk premium for the 2-year security? 6.3-3-3 = 0.3% Intermediate Problems 7-20 • 5-7 Bond Valuation with Semiannual payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%.
Sales (7950 units) Variable expenses Contribution margin Fixed expenses Net Operating Income $206,700 143,100 $63,600 56,000 $7,600 $26.00 18.00 $8.00 As an alternative, you could have found the net income using the following method: Original net operating income Change in contribution margin (-50 units * $8.00 per unit) New net operating income 3. The sales volume is 7,0000. $8,000 -400 $7,600 Sales (7000 units) Variable expenses Contribution margin Fixed expenses Net Operating Income $182,000 126,000 $56,000 56,000 $0 $26.00 18.00 $8.00 This is the company's break even point because it it the point where the contribution margin covers the fixed expenses and there is no net income/net loss (it is zero). Exercise 5-4 Computing and Using the CM Ratio Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and total fized expenses were $45,000. Required: 1.
Text Problem Sets and Concept and Principles Summary FIN 571 Text Problem Sets and Concept and Principles Summary Problem A3: (Bond valuation) General Electric made a coupon payment yesterday on its 6.75% bonds that mature in 8.5 years. If the required return on these bonds is 8% APR, what should be the market price of these bonds? PMT -33.75 FV -1000 N 17 Rate 4% Market Price $923.96 Fair Value of a bond = C/r*(1-1/(1+r)^n)+M/(1+r)^n Assuming that it’s a semi-annual bond with face value of $1000 A13. (Required return for a preferred stock) Sony $4.50 preferred is selling for $65.50. The preferred dividend is non-growing.
Given the risk premium of 6% and risk free rate of 9.5%, we get the discount rate (Opportunity cost of capital of the project) which is 8.5%+0.91*6%=14.96%. Calculate the net present value of the Collinsville plant without the laminate technology. Remember that the transaction takes place at the end of 1979. To calculate the net present value of the Collinsville plant we should analyze all the cash flows it will generate in the next 10 years. We need a few assumptions: a.
3. The rate variance is calculated by the difference between the $16.90 actual labor rate vs the $16 budgeted rate, then we multiply the difference by the 9000 actual labor hours which gives us an $8,100 unfavorable rate variance. To figure out the efficiency variance we multiply the $16 budgeted rate by the difference between the 9,000 actual labor hours and the 10,000 budgeted hours, giving us a $16,000 favorable efficiency variance. As a result of the difference between the rate and efficiency variances we end up having a $7,900 favorable flexible budget variance. 4.
It’s expected to grow 8 % nationwide and only 2 % in PA. Although growth isn’t expected to be as high, the wages within the state exceed the overall wage throughout PA will receive $ 0.30 more per hour. Location | Pay Period | 2009 | | | 10% | 25% | Median | 75% | 90% | United States | Hourly | $7.41 | $8.28 | $9.74 | $13.11 | $18.49 | | Yearly | $15,400 | $17,200 | $20,300 | $27,300 | $38,500 | Pennsylvania | Hourly | $7.43 | $8.22 | $10.04 | $13.70 | $19.21
Answer Market value per share =$75 Common equity= 6,000,000 Number of share outstanding =800,000,000 Market to book ration = $75/(6,000,000/800,000,000) 6,000,000/800,000,000=.75 Market to book ration= 75/.75= 100 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? Answer Price /cash flow ratio= price per share/ cash flow per share Price per share = $8 x $3 = $24 P.E = Price per share / EPS P.E = $24 / 1.5 = 16 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 ROE Answer ROE= profit margin x asset turnover x equity multiplier =3% asset turnover = sales/asset = 50/100= 2 equity multiplier=2 ROE= 3% x2 x2= 12% 3-6 Du Pont Analysis Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%.
The older pager devices getting obsolete Price Break Down: Tallant: ($16.95+$1.95+$11.9) x20 pagers x12 months + ($60.00x20pagers) =$8,592.00 per year Saxton: $13.95x20pagers x12months = $3348.00 per year Case Analysis: Price wise Cottrill will save $5244.00 per year if they chose Saxton over Tallant. Cotrill will also have a direct person of contact at Saxton which seems to be a very attractive option. However, the direct contact Natalie Hopkins is a sales representative who might not be much aware of the technical issues which the pager might have and in real time situations Natalie might also need to call or email an expert which might take the same amount of time as the customer service in Tallant. The main concern in this case is the functionality issue with the Saxton pager which was seen on the trail which seemed to have been fixed after
| gross profit margin | 54.9% | 53.1% | 49.5% | 43.6% | | b. | operating profit margin | 32.9% | 30.5% | 23.6% | 10.6% | | c. | net profit margin | 28.9% | 26.5% | 19.6% | 6.6% | | d. | net return on total assets | 40.6% | 38.9% | 26.4% | 10.8% | | e. | return on stockholders' equity | 46.1% | 44.7% | 30.8% | 12.9% | | f. | current ratio | 2.5 | 1.9 | 1.8 | .8 | | g. | total debt-to-assets ratio | .1 | .1 | .1 | .2 | | h. | debt-to-equity ratio | .1 | .1 | .2 | .2 | | i. | days of inventory | 79.4 | 74.6 | 78.3 | 32.4 | | j. | inventory turnover | 4.5 | 4.9 | 4.7 | 11.3 | The gross profit margin shows a steady increase in profits that coincide with the net profit margins proving that the pricing of Ugly Shoe's products are increasingly accurate. At the same time, we can see that management’s decisions are effective in converting assets to profit through the results of their net return on assets.
AC324, Intermediate Accounting I D. L. Smith Practice Quiz 3 Chapters 6-7 November 2, 2013 1. Which table would show the largest factor for an interest rate of 8% for five periods? A) Future value of an ordinary annuity of 1 B) Present value of an ordinary annuity of 1 C) Future value of an annuity due of 1 D) Present value of an annuity due of 1 2. An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at A) 8% for eight periods.