Question: During 2017, Towson Recording Company increased its

> Procter & Gamble reported the following information for its fiscal year end: On net sales of $51.407 billion, the company earned net income after taxes of $6.481 billion. It had cost of goods sold of $25.076 billion and EBIT of $9.827 billion. What are t

> Cisco Systems has total assets of $35.594 billion, total debt of $9.678 billion, and net sales of $22.045 billion. Its net profit margin for the year is 20 percent, while the operating profit margin is 30 percent. What are Cisco’s net income, EBIT ROA, R

> Flying Penguins Corp. has total current assets of $11,845,175, current liabilities of $5,311,020, and a quick ratio of 0.89. How much inventory does it have?

> Conseco, Inc., has a debt ratio of 0.56. What are the company’s debt-to-equity ratio and equity multiplier?

> Nimitz Rental Company had depreciation expenses of $108,905, interest expenses of $78,112, and an EBIT of $1,254,338 for the year ended June 30, 2017. What are the times interest earned and cash coverage ratios for this company?

> If Norwood Corp.’s management wants to reduce the DSO from that calculated in Problem 4.16 to an industry average of 56.3 days and its net sales are expected to decline by about 12 percent, what would be the new level of receivables?

> Norwood Corp. currently has accounts receivable of $1,223,675 on net sales of $6,216,900. What are its accounts receivable turnover and days’ sales outstanding (DSO)?

> Calculate the price of a five-year bond that has a coupon of 6.5 percent paid annually. The current market rate is 5.75 percent?

> Lambda Corporation has current liabilities of $450,000, a quick ratio of 1.8, inventory turnover of 5.0, and a current ratio of 3.5. What is the cost of goods sold for Lambda Corporation?

> Laurel Electronics has a quick ratio of 1.15, current liabilities of $5,311,020, and inventories of $7,121,599. What is the firm’s current ratio?

> Chisel Corporation has 3 million shares outstanding at a price per share of $3.25. If the debt-to-equity ratio is 1.7 and total book value of debt equals $12,400,000, what is the market-to-book ratio for Chisel Corporation?

> Rockwell Jewelers management announced that the company had net earnings of $6,481,778 for this year. The company has 2,543,800 shares outstanding, and the year-end stock price is $54.21. What are Rockwell’s earnings per share and P/E ratio?

> Trademark Corp.’s financial manager collected the following information for its peer group to compare its performance against that of its peers. a. Explain how Trademark is performing relative to its peers. b. How do the industry rati

> Explain why the quick ratio or acid-test ratio is a better measure of a firm’s liquidity than the current ratio?

> Eau Claire Paper Mill, Inc., had, at the beginning of the current fiscal year, April 1, 2016, retained earnings of $323,325. During the year ended March 31, 2017, the company produced net income after taxes of $713,445 and paid out 45 percent of its net

> The Centennial Chemical Corporation announced that, for the period ending March 31, 2017, it had earned income after taxes of $2,768,028.25 on revenues of $13,144,680. The company’s costs (excluding depreciation and amortization) amounted to 61 percent o

> Mount Hebron Electrical Company’s financial statements indicated that the company had earnings before interest and taxes of $718,323. The interest rate on its $850,000 debt was 8.95 percent. Calculate the taxes the company is likely to owe. What are the

> Columbia Construction Company earned $451,888 during the year ended June 30, 2017. After paying out $225,794 in dividends, the balance went into retained earnings. If the firm’s total retained earnings were $846,972 at the end of fiscal year 2017, what w

> You must choose between investing in stock A and stock B. You have already used CAPM to calculate the rate of return you should expect to receive for each stock given their systematic risk and decided that the expected return for both exceeds that predic

> Sosa Corporation recently reported an EBITDA of $31.3 million and net income of $9.7 million. The company had $6.8 million in interest expense, and its average corporate tax rate was 35 percent. What was its depreciation and amortization expense?

> Nimitz Rental Company provided the following information to its auditors. For the year ended March 31, 2017, the company had revenues of $878,412, general and administrative expenses of $352,666, depreciation expenses of $131,455, leasing expenses of $10

> Reservoir Bottling Co. reported the following information at the end of the year. Total current assets are worth $237,513 at book value and $219,344 at market value. In addition, plant and equipment have a market value of $343,222, and a book value of $3

> Mukhopadhya Network Associates has a current ratio of 1.60, where the current ratio is defined as follows: current ratio = current assets/current liabilities. The firm’s current assets are equal to $1,233,265, its accounts payables are $419,357, and its

> Based on the financial statements for Tomkovick Golf Company in Problem 3.32, compute the cash flow invested in net working capital and the cash flow invested in long-term assets that you would use in a calculation of the cash flows to investors for 2017

> Analysts following the Tomkovick Golf Company were given the following balance sheet information for the years ended June 30, 2017 and June 30 2016: In addition, it was reported that the company had a net income of $ 3,155,848 and that depreciation exp

> Vanderheiden Hog Products Corp. provided the following financial information for the quarter ending June 30, 2017: Net income: …………………….…….………. $189,425 Depreciation and amortization: ….……... $63,114 Increase in receivables: ……………………. $ 62,154 Increase

> Menomonie Casino Company earned $23,458,933 before interest and taxes for the fiscal year ending March 31, 2017. If the casino had interest expenses of $1,645,123, calculate its tax obligation using Exhibit 3.6. What are the marginal and the average tax

> Your parents have given you $1,000 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in a bank CD that pays 6.75 percent interest. You know that the trip costs $1,025 right now and that the

> Imagine you borrow $500 from your roommate, agreeing to pay her back $500 plus 7 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 4.25 percent. What is the total dollar amount you will have to pay her

> During the period from 2011 through 2015 the annual returns on small U.S. stocks were -3.26 percent, 18.23 percent, 45.07 percent, 2.92 percent, and -3.60 percent, respectively. What would a $1 investment, made at the beginning of 2011, have been worth

> What is the Fisher equation, and how is it used?

> How does the nominal rate of interest vary over time?

> What is the real rate of interest, and how is it determined?

> For its most recent fiscal year, Carmichael Hobby Shop recorded EBITDA of $512,725.20, EBIT of $362,450.20, zero interest expense, and cash flow to investors from operating activity of $348,461.25. Assuming there are no non-cash revenues recorded on the

> Fraser Corporation has announced that its net income for the year ended June 30, 2017, was $1,353,412. The company had EBITDA of $ 4,967,855, and its depreciation and amortization expense was equal to $1,112,685. The company’s average tax rate is 34 perc

> If the market is strong-form efficient, then trading on tips you hear from Jim Cramer (the host of Mad Money on CNBC) will generate no excess returns (i.e., returns in excess of fair compensation for the risk you are bearing). True or false?

> In problem 2.20, if the market is efficient, would it have been possible for Zippy’s stock price to go down on the day that the firm announced the strong fourth quarter results?

> Zippy Computers announced strong fourth quarter results. Sales and earnings were both above analysts’ expectations. You notice in the newspaper that Zippy’s stock price went up sharply on the day of the announcement. If no other information about Zippy b

> Describe the informational differences that distinguish the three forms of market efficiency?

> Tim Dye, the CFO of Blackwell Automotive, Inc., is putting together this year’s financial statements. He has gathered the following balance sheet information. The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of $313,299,

> The expected value of a normal distribution of prices for a stock is $50. If you are 90 percent sure that the price of the stock will be between $40 and $60, then what is the variance of the prices for the stock?

> Manz Property Management Company announced that in the year ended June 30, 2017, its earnings before taxes amounted to $1,478,936. Calculate its taxes using Exhibit 3.6?

> What is the primary role of money markets? Explain how the money markets work?

> The Oakland Mills Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.45 million, cost of goods sold of $812,500, depreciation expenses of $175,000, and interest expenses of $8

> Laurel Electronics reported the following information at its annual meetings: The company had cash and marketable securities worth $1,235,455, accounts payables worth $4,159,357, inventory of $7,121,599, accounts receivables of $3,488,121, short-term not

> Explain how the choice of FIFO versus LIFO can affect a firm’s balance sheet and income statement?

> Caustic Chemicals management identified the following cash flows as significant in its year-end meeting with analysts. During the year Caustic had repaid existing debt of $312,080 and raised additional debt capital of $650,000. It also repurchased stock

> Identify and describe the noncash expenses that a firm may incur?

> What does it mean to “underwrite” a new security issue? What compensation does an investment banker get from underwriting a security issue?

> Describe the organization of the statement of cash flows?

> You know that the price of CFI, Inc., stock will be $12 exactly one year from today. Today the price of the stock is $11. Describe what must happen to the price of CFI, Inc., today in order for an investor to generate a 20 percent return over the next ye

> Trader Inc. is a $300 million company, as measured by asset value, and Horst Corp. is a $35 million company. Both are privately held corporations. Explain which firm more likely to go public and register with the SEC, and why?

> The financial information for Laurel Electronics referred to in Problem 3.5 is all at book value. Suppose marking to market reveals that the market value of the firm’s inventory is 20 percent below its book value, its receivables are 25 percent below the

> Suppose you own a security that you know can be easily sold in the secondary market, but the security will sell at a lower price than you paid for it. What does this imply for the security’s marketability and liquidity?

> How does the use of market-value accounting help managers?

> What is the difference between saver–lenders and borrower–spenders, and who are the major representatives of each group?

> Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 5.875 percent. If these bonds have a market price of $981.13, what yield to maturity can she expect to earn?

> Northrop Real Estate Company management is planning to fund a development project by issuing 10-year zero coupon bonds with a face value of $1,000. Assuming semiannual compounding, what will be the price of these bonds if the appropriate discount rate is

> Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 10.5 percent, what is the value of these bonds?

> Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond?

> You are interested in investing in a five-year bond that pays a 7.8 percent coupon rate with interest to be received semiannually. Your required rate of return is 8.4 percent. What is the most you would be willing to pay for this bond?

> Kaaran made a friendly wager with a colleague that involves the result from flipping a coin. If heads comes up, Kaaran must pay her colleague $15; otherwise, her colleague will pay Kaaran $15. What is Kaaran’s expected cash flow, and what is the variance

> Regatta, Inc., has seven-year bonds outstanding that pay a 12 percent coupon rate. Investors buying these bonds today can expect to earn a yield to maturity of 8.875 percent. What is the current value of these bonds? Assume annual coupon payments.

> Zippy Corporation just sold $30 million of convertible bonds with a conversion ratio of 40. Each $1,000 bond is convertible into 25 shares of Zippy’s stock. a. What is the conversion price of Zippy’s stock? b. If the current price of Zippy’s stock is $15

> Rachette Corp. has18-year bonds outstanding. These bonds, which pay interest semiannually, have a coupon rate of 9.735 percent and a yield to maturity of 7.95 percent. a. Compute the current price of these bonds. b. If the bonds can be called in five yea

> Knight, Inc., has issued a three-year bond that pays a coupon rate of 6.10 percent. Coupon payments are made semiannually. Given the market rate of interest of 5.80 percent, what is the market value of the bond?

> The Maryland Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a rate of 9.875 percent. The current market rate for similar securities is 11 percent. a. What is the current market value of one of these bonds?

> Peabody Corp. has seven-year bonds outstanding. The bonds pay a coupon of 8.375 percent semiannually and are currently worth $1,063.49. The bonds can be called in three years at price of $1,075. a. What is the yield to maturity of these bonds? b. What is

> Showbiz, Inc., has issued eight-year bonds with a coupon of 6.375 percent and semiannual coupon payments. The market’s required rate of return on such bonds is 7.65 percent. a. What is the market price of these bonds? b. If the above bond is callable af

> Pullman Corp issued 10-year bonds four years ago with a coupon rate of 9.375 percent. At the time of issue, the bonds sold at par. Today bonds of similar risk and maturity must pay an annual coupon of 6.25 percent to sell at par value. Assuming semiannua

> You bought a six-year bond issued by Runaway Corp. four years ago. At that time, you paid $974.33 for the bond. The bond pays a coupon rate of 7.375 percent, and coupon payments are made semiannually. Currently, the bond is priced at $1,023.56. What yiel

> Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $936.05. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,048.77, what is the yield that Trevor would earn by selling

> Dynamo Corp. is expecting annual payments of $34,225 for the next seven years from a customer. What is the present value of this annuity if the discount rate is 8.5 percent?

> Prepare a common-size balance sheet from the following information for Abercrombie Supply Company. Abercrombie Supply Company Balance Sheet as of June 30, 2017 ($ thousands) Liabilities and Equity: Accounts payable Notes payable Assets: Cash and mark

> Brown & Co. issued seven-year bonds two years ago that can be called after two years. The bonds make semiannual coupon payments at a coupon rate of 7.875 percent. Each bond has a market value of $1,053.40, and the call price is $1,078.75. If an investor

> Adrienne Dawson is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these bonds have a face value of $1,000 and are currently selling at $404.59, what is the expected return on them? Assume that interest compounds semiannually on

> Serengeti Corp. has five-year bonds outstanding that pay a coupon of 8.8 percent. If these bonds are priced at $1,064.86, what is the yield to maturity on these bonds? Assume semiannual coupon payments. What is the effective annual yield?

> Electrolex, Inc., has four-year bonds outstanding that pay a coupon rate of 6.6 percent and make coupon payments semiannually. If these bonds are currently selling at $914.89, what is the yield to maturity that an investor can expect to earn on these bon

> Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays an annual coupon rate of 5.5 percent. If the current market rate is 7.25 percent, what is the maximum amount Pierre shou

> Rockinghouse Corp. management plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $439.76. Assuming annual coupon payments, what is the yield to maturity on these bonds?

> Kintel, Inc., management wants to raise $1 million by issuing six-year zero coupon bonds with a face value of $1,000. The company’s investment banker states that investors would use an 11.4 percent discount rate to value such bonds. At what price would t

> Nanotech, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 9.5 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 8 percent, h

> Rockne, Inc., has outstanding bonds that will mature in six years and pay an 8 percent coupon semiannually. If you paid $1036.65 today and your required rate of return was 6.6 percent, did you pay the right price for the bond?

> Marshall Company is issuing eight-year bonds with a coupon rate of 6.5 percent and semiannual coupon payments. If the current market rate for similar bonds is 8 percent, what will be the bond price? If company management wants to raise $1.25 million, how

> Becky Scholes has $150,000 to invest. She wants to be able to withdraw $12,500 every year forever without using up any of her principal. What interest rate would her investment have to earn in order for her to be able to do so?

> Lopez Information Systems management is planning to issue 10-year bonds. The going market yield for such bonds is 8.125 percent. Assume that coupon payments will be made semiannually. Management is trying to decide between issuing an 8 percent coupon bon

> The International Publishing Group is raising $10 million by issuing 15-year bonds with a coupon rate of 8.5 percent. Coupon payments will be made annually. Investors buying the bonds today will earn a yield to maturity of 8.5 percent. At what price will

> Four years ago, Lisa Stills bought six-year, 5.5 percent coupon bonds issued by the Fairways Corp. for $947.68. If she sells these bonds at the current price of $894.52, what will be her realized yield on the bonds? Assume similar coupon-paying bonds mak

> Josh Kavern bought 10-year, 12 percent coupon bonds issued by the U.S. Treasury three years ago at $913.44. If he sells these bonds, for which he paid the face value of $1,000, at the current price of $804.59, what is his realized yield on the bonds? Ass

> Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and make semiannual coupon payments. What is the current market yield on this bond?

> BA Corp is issuing a 10-year bond with a coupon rate of 8 percent. The interest rate for similar bonds is currently 6 percent. Assuming annual payments, what is the value of the bond?

> Describe how investing in more than one asset can reduce risk through diversification?

> What was the average annual return that Tanner earned over the 2012 through 2015 period (see problem 7.6)?

> Stocks A, B, and C have expected returns of 15 percent, 15 percent, and 12 percent, respectively, while their standard deviations are 45 percent, 30 percent, and 30 percent, respectively. If you were considering the purchase of each of these stocks as th

> Describe the general relation between risk and return that we observe in the historical bond and stock market data?

> Mike White is planning to save up for a trip to Europe in three years. He will need $7,500 when he is ready to make the trip. He plans to invest the same amount at the end of each of the next three years in an account paying 6 percent. What is the amount

> You have been provided the following data on the securities of three firms and the market: Assume the CAPM and SML are true and fill in the missing values in the table. Would you invest in the stock of any of the three firms? If so, which one(s) and why

> If the CAPM describes the relation between systematic risk and expected returns, can both an individual asset and the market portfolio of all risky assets have negative expected real rates of return? Why or why not?

> Draw the Security Market Line (SML) for the case where the market risk premium is 5 percent and the risk-free rate is 7 percent. Now suppose an asset has a beta of –1.0 and an expected return of 4 percent. Plot it on your graph. Is the security properly

> Brad is about to purchase an additional asset for his well-diversified portfolio. He notices that when he plots the historical returns of the asset against those of the market portfolio, the line of best fit tends to have a large amount of prediction err