6 6 AP AP AP AN AN 5. 5. 6 6 E E 12. 6 AP K C C C C AP AP AP 16. 17. 18. 19. 20. 10. 11. 12. 6 6 6 6 6 6 6 6 C C C C AP AP AN AN 13. 14. 15. 6 6 6 AN AN AN 21. 22. 7 7 C AN Brief Exercises Problems: Set A 1. 1. 5, 6 5, 6 AN AN Problems: Set B 13-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number 1A 2A Difficulty Level Simple Simple Time Allotted (min.) 20–30 20–30 Description Prepare vertical analysis and comment on profitability. Compute ratios from balance sheet and income statement
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forcasting Mr. George Dodge, Clarkson Lumber Company is doing well but there is the issue of whether or not there is too high a risk in granting the request for the $750,000 line of credit. There are many supporting strong points but it also has some problems to work out. This is a company that has many good characteristics and looks promising but needs the extra money to pay off loans, inventory, and supplies. I recommend this company to receive the line of credit. Looking at the individual ratios seen
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used in NPV calculations? - What is a firm’s Asset Beta & how do we lever Asset Betas and unlever Equity Betas? - Link to previous lectures - No longer use a “given” discount rate. We will calculate the correct discount rate for our NPV calculations. WACC - 1 2 1.0 The Cost of Capital: Some Preliminaries • A. Required (rate of) Return versus Cost of Capital • Cost of capital - required return - appropriate discount rate all denote the same opportunity cost of using capital in one way as opposed
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FIN 571 Week 4 Connect Problems – Assignment 1. Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 11 years Coupon rate: 9 percent Semiannual payments Calculate the price of this bond if the YTM is (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Price of the Bond a. 9 percent $ _____ b. 11 percent $ _____ c. 7 percent $ _____ 2. Watters Umbrella Corp. issued 20-year bonds 2
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charges of $300 per year. Management projects an EBIT of $1,000 on sales of $10,000, and it expects to have a total asset turnover ratio of 2.0 ×. Under these conditions, the average tax rate will be 30 percent. If the changes are made, what return on equity (ROE) will Coastal earn? What is the ROA? 2–5. Barbell Corporation's income statement reports that the company's “bottom line” was $180,000 in 2012. The statement also shows that the company had depreciation and amortization expenses equal
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PROBLEM 2 (a) Derive for each its return on equity based on the three DuPont components. | K | L | M | Net Profit margin | 0.04 | 0.06 | 0.10 | Total assets turnover | 2.20 | 2.00 | 1.40 | Total assets/equity | 2.40 | 2.20 | 1.50 | ROE | 0.211 | 0.264 | 0.210 | (b) Given the following earnings and dividends, compute the estimated sustainable growth rate for each firm. | K | L | M | Earnings/share | 2.75 | 3.00 | 4.50 | Dividends/share | 1.25 | 1.00 | 1.00 | Payout Rate | 0
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forecasted another capital expenditure of a $4.5 billion in 1991 (an increase from the previous year). However, it was largely due to these expenditures that the company was able to process heavy Alaskan crude oil more efficiently and also get a good return on their investment. For example, the light product yield in their refiners was higher than the industry average. Some of their investments were also directed towards environmental projects and PPC anticipate spending another $3 billion in the
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concerned with profits or the return on their investment. | | | 3-2. | Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks down return on stockholders’ equity.The Du Pont system of analysis breaks out the return on assets between the profit margin and asset turnover. Return on Assets = Profit Margin × Asset TurnoverIn this fashion, we can assess the joint impact of profitability and asset turnover on the overall return on assets. This is a particularly
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SOLUTIONS TO EXERCISES Ex. 14.1 a. b. c. d. e. f. g. Accounts receivable decreased 21% ($34,000 decrease ÷ $160,000 = 21% decrease). Marketable securities decreased 100% ($250,000 decrease ÷ $250,000 = 100% decrease). A percentage change cannot be calculated because retained earnings showed a negative amount (a deficit) in the base year and a positive amount in the following year. A percentage change cannot be calculated because of the zero amount of notes receivable in 2008
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Mr. George Dodge, Clarkson Lumber Company is doing well but there is the issue of whether or not there is too high a risk in granting the request for the $750,000 line of credit. There are many supporting strong points but it also has some problems to work out. This is a company that has many good characteristics and looks promising but needs the extra money to pay off loans, inventory, and supplies. I recommend this company to receive the line of credit. Looking at the individual ratios seen in
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