Question: Some recent financial statements for Smolira Golf

> In Problem 24, suppose the firm was operating at only 80 percent capacity in 2020. What is EFN now? Problem 24: The most recent financial statements for Crosby, Inc., follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will rema

> The most recent financial statements for Crosby, Inc., follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current

> Calculate the internal growth rate for the company in Problem 22. Now calculate the internal growth rate using ROA × b for both beginning of period and end of period total assets. What do you observe? Problem 22: Deprey, Inc., had equity of $153,000 at

> Deprey, Inc., had equity of $153,000 at the beginning of the year. At the end of the year, the company had total assets of $215,000. During the year, the company sold no new equity. Net income for the year was $29,000 and dividends were $6,400. What is t

> You’ve collected the following information about Caccamisse, Inc.: Sales = $255,000 Net income = $19,200 Dividends = $7,500 Total debt = $67,000 Total equity = $77,000 What is the sustainable growth rate for the company? If it does grow at this rate, how

> Based on the following information, calculate the sustainable growth rate for Hendrix Guitars, Inc.: Profit margin = 5.9% Total asset turnover = 1.15 Total debt ratio = .45 Payout ratio = 40%

> In Question 1, assume the company pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements and determine the external financing needed. Question 1: Consid

> What happens to the future value of a perpetuity if interest rates increase? What if interest rates decrease?

> A firm wishes to maintain an internal growth rate of 6.4 percent and a dividend payout ratio of 25 percent. The current profit margin is 5.7 percent, and the firm uses no external financing sources. What must total asset turnover be?

> Gamgee Co. wishes to maintain a growth rate of 11 percent per year, a debt-equity ratio of .75, and a dividend payout ratio of 25 percent. The ratio of total assets to sales is constant at .65. What profit margin must the firm achieve?

> For the company in Problem 16, suppose fixed assets are $590,000 and sales are projected to grow to $910,000. How much in new fixed assets are required to support this growth in sales? Assume the company wants to operate at full capacity.

> Pinnacle Mfg., Inc., is currently operating at only 94 percent of fixed asset capacity. Current sales are $830,000. How fast can sales grow before any new fixed assets are needed?

> Assuming the following ratios are constant, what is the sustainable growth rate? Total asset turnover = 3.20 Profit margin = 5.2% Equity multiplier = .95 Payout ratio = 35%

> Based on the following information, calculate the sustainable growth rate for Kayla’s Heavy Equipment: Profit margin = 7.3% Capital intensity ratio = .95 Debt-equity ratio = 1.05 Net income = $84,000 Dividends = $24,000

> If Premier Corp. has an ROE of 14.1 percent and a payout ratio of 25 percent, what is its sustainable growth rate?

> If Fairlane Co. has an ROA of 8.3 percent and a payout ratio of 35 percent, what is its internal growth rate?

> From the previous two questions, prepare a pro forma balance sheet showing EFN, assuming an increase in sales of 15 percent, no new external debt or equity financing, and a constant payout ratio. Problem 10: The balance sheet for the Heir Jordan Corpora

> The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement in the previous problem, supply the missing information using the percentage of sales approach. Assume that accounts payable vary with sales, wh

> The 2020 balance sheet of Osaka’s Tennis Shop, Inc., showed $780,000 in the common stock account and $4.78 million in the additional paid-in surplus account. The 2021 balance sheet showed $965,000 and $5.04 million in the same two accounts, respectively.

> Consider the following simplified financial statements for the Wesney Corporation (assuming no income taxes): The company has predicted a sales increase of 15 percent. It has predicted that every item on the balance sheet will increase by 15 percent as

> Based only on the following information for Ortiz Corp., did cash go up or down? By how much? Classify each event as a source or use of cash. Decrease in inventory ……………………………….. $425 Decrease in accounts payable ……………………… 230 Increase in notes payable

> Jackson Corp. has a profit margin of 5.8 percent, total asset turnover of 1.75, and ROE of 13.85 percent. What is this firm’s debt-equity ratio?

> If Rogers, Inc., has an equity multiplier of 1.43, total asset turnover of 1.87, and a profit margin of 6.05 percent, what is its ROE?

> Bolton Corp. had additions to retained earnings for the year just ended of $435,000. The firm paid out $245,000 in cash dividends, and it has ending total equity of $5.7 million. If the company currently has 175,000 shares of common stock outstanding, wh

> Mobius, Inc., has a total debt ratio of .57. What is its debt-equity ratio? What is its equity multiplier?

> The Top Corporation has ending inventory of $426,287, and cost of goods sold for the year just ended was $4,738,216. What is the inventory turnover? The days’ sales in inventory? How long on average did a unit of inventory sit on the shelf before it was

> Dahlia Corp. has a current accounts receivable balance of $513,260. Credit sales for the year just ended were $4,986,340. What is the receivables turnover? The days’ sales in receivables? How long did it take on average for credit customers to pay off th

> Cage Corp. has current liabilities of $415,000, a quick ratio of .86, inventory turnover of 10.3, and a current ratio of 1.34. What is the cost of goods sold for the company?

> Whipporwill, Inc.’s, net income for the most recent year was $19,382. The tax rate was 21 percent. The firm paid $3,681 in total interest expense and deducted $4,738 in depreciation expense. What was the cash coverage ratio for the year?

> The 2020 balance sheet of Osaka’s Tennis Shop, Inc., showed long-term debt of $2.25 million, and the 2021 balance sheet showed long-term debt of $2.66 million. The 2021 income statement showed an interest expense of $305,000. What was the firm’s cash flo

> In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $1.25 to go buy $50 worth of groceries, then your child makes twice as much on the trip as we do.â€&

> The Mikado Company has a long-term debt ratio of .35 and a current ratio of 1.45. Current liabilities are $1,140, sales are $8,370, profit margin is 8.3 percent, and ROE is 16.5 percent. What is the amount of the firm’s net fixed assets?

> Denver, Inc., has sales of $14.2 million, total assets of $11.3 million, and total debt of $4.9 million. If the profit margin is 5 percent, what is net income? What is ROA? What is ROE?

> A company has net income of $213,700, a profit margin of 7.1 percent, and an accounts receivable balance of $126,385. Assuming 65 percent of sales are on credit, what is the company’s days’ sales in receivables?

> Y3K, Inc., has sales of $5,987, total assets of $2,532, and a debt-equity ratio of .57. If its return on equity is 11 percent, what is its net income?

> Just Dew It Corporation reports the following balance sheet information for 2020 and 2021. Use this information to work. Based on the balance sheets given for Just Dew It, calculate the following financial ratios for each year: a. Current ratio. b. Qui

> Just Dew It Corporation reports the following balance sheet information for 2020 and 2021. Use this information to work. For each account on this company’s balance sheet, show the change in the account during 2021 and note whether thi

> Just Dew It Corporation reports the following balance sheet information for 2020 and 2021. Use this information to work. Prepare the 2021 combined common-size, common-base year balance sheet for Just Dew It.

> Just Dew It Corporation reports the following balance sheet information for 2020 and 2021. Use this information to work. Prepare the 2021 common-base year balance sheet for Just Dew It.

> Just Dew It Corporation reports the following balance sheet information for 2020 and 2021. Use this information to work. Prepare the 2020 and 2021 common-size balance sheets for Just Dew It.

> Specialized ratios are sometimes used in specific industries. For example, the book-to-bill ratio is closely watched for semiconductor manufacturers. A ratio of .93 indicates that for every $100 worth of chips shipped over some period, only $93 worth of

> Kodi Company has a debt-equity ratio of .63. Return on assets is 8.4 percent, and total equity is $645,000. What is the equity multiplier? Return on equity? Net income?

> The market value of the equity of Nina, Inc., is $755,000. The balance sheet shows $63,000 in cash and $220,000 in debt, while the income statement has EBIT of $95,000 and a total of $178,000 in depreciation and amortization. What is the enterprise value

> Dexter, Inc., had a cost of goods sold of $75,318. At the end of the year, the accounts payable balance was $18,452. How long on average did it take the company to pay off its suppliers during the year? What might a large value for this ratio imply?

> SDJ, Inc., has net working capital of $2,630, current liabilities of $5,970, and inventory of $3,860. What is the current ratio? What is the quick ratio?

> Some recent financial statements for Smolira Golf Corp. follow. Use this information to work. What is Tobin’s Q for Smolira Golf? What assumptions are you making about the book value of debt and the market value of debt? What about t

> Some recent financial statements for Smolira Golf Corp. follow. Use this information to work. Smolira Golf Corp. has 15,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2021 was $79. What is the price-ear

> Some recent financial statements for Smolira Golf Corp. follow. Use this information to work. Prepare the 2021 statement of cash flows for Smolira Golf Corp.

> Some recent financial statements for Smolira Golf Corp. follow. Use this information to work. Construct the DuPont identity for Smolira Golf Corp.

> Prince Albert Canning PLC had a net loss of £26,382 on sales of £315,650. What was the company’s profit margin? Does the fact that these figures are quoted in a foreign currency make any difference? Why? In dollars, sales were $385,815. What was the net

> Wallace Driving School’s 2020 balance sheet showed net fixed assets of $2.3 million, and the 2021 balance sheet showed net fixed assets of $3.1 million. The company’s 2021 income statement showed a depreciation expense of $327,000. What was net capital s

> Use the following information for Taco Swell, Inc., (assume the tax rate is 21 percent): For 2021, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders.

> Use the following information for Taco Swell, Inc., (assume the tax rate is 21 percent): Draw up an income statement and balance sheet for this company for 2020 and 2021.

> What do you think about the state lottery discussed in the chapter advertising a $500,000 prize when the lump sum option is $250,000? Is it deceptive advertising?

> Suppose the firm in Problem 2 paid out $125,000 in cash dividends. What is the addition to retained earnings? Problem 2: Nataro, Inc., has sales of $742,000, costs of $316,000, depreciation expense of $39,000, interest expense of $34,000, and a tax rat

> As you increase the length of time involved, what happens to the present value of an annuity? What happens to the future value?

> There are four pieces to an annuity present value. What are they?

> Suppose the firm in Problem 3 had 75,000 shares of common stock outstanding. What is the earnings per share, or EPS, figure? What is the dividends per share figure? Problem 3: Suppose the firm in Problem 2 paid out $125,000 in cash dividends. What is th

> Nataro, Inc., has sales of $742,000, costs of $316,000, depreciation expense of $39,000, interest expense of $34,000, and a tax rate of 21 percent. What is the net income for this firm?

> Firm A and Firm B have debt-total asset ratios of 60 percent and 35 percent, respectively, and returns on total assets of 4.5 percent and 8 percent, respectively. Which firm has a greater return on equity?

> Bing, Inc., has current assets of $5,400, net fixed assets of $28,100, current liabilities of $4,100, and long-term debt of $10,600. What is the value of the shareholders’ equity account for this firm? How much is net working capital?

> Given the information for Osaka’s Tennis Shop, Inc., in Problems 9 and 10, suppose you also know that the firm’s net capital spending for 2021 was $1.5 million and that the firm reduced its net working capital investment by $55,000. What was the firm’s 2

> The 2020 balance sheet of Dugan, Inc., showed current assets of $5,320 and current liabilities of $2,510. The 2021 balance sheet showed current assets of $5,970 and current liabilities of $3,240. What was the company’s 2021 change in net working capital,

> Timmy Tappan is single and had $189,000 in taxable income. Using the rates from Table 2.3 in the chapter, calculate his income taxes. What is the average tax rate? What is the marginal tax rate?

> Pursell Bank offers you a five-year loan for $100,000 at an annual interest rate of 6.8 percent. What will your annual loan payment be?

> You want to have $75,000 in your savings account 12 years from now, and you’re prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.4 percent interest, what amount must you deposit each year?

> A check-cashing store is in the business of making personal loans to walk-up customers. The store makes only one-week loans at 6.3 percent interest per week. a. What APR must the store report to its customers? What EAR are customers actually paying? b. N

> You have 40 years left until retirement and want to retire with $4.5 million. Your salary is paid annually, and you will receive $60,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn an annual return of

> What is the value of an investment that pays $75,000 every other year forever, if the first payment occurs one year from today and the discount rate is 7 percent compounded daily? What is the value today if the first payment occurs four years from today?

> You have just arranged for a $2.55 million mortgage to finance the purchase of a large tract of land. The mortgage has an APR of 5.3 percent, and it calls for monthly payments over the next 30 years. However, the loan has an eight-year balloon payment, m

> Graffiti Advertising, Inc., reported the following financial statements for the last two years. Construct the cash flow identity for the company. Explain what each number means.

> An insurance company is offering a new policy to its customers. Typically, the policy is bought by a parent or grandparent for a child at the child’s birth. The purchaser (say, the parent) makes the following six payments to the insurance company: First

> If you deposit $4,900 at the end of each of the next 20 years into an account paying 10.3 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years?

> Your Christmas ski vacation was great, but it unfortunately ran a bit over budget. All is not lost: You just received an offer in the mail to transfer your $15,000 balance from your current credit card, which charges an annual rate of 18.6 percent, to a

> You have successfully started and operated a company for the past 10 years. You have decided that it is time to sell your company and spend time on the beaches of Hawaii. A potential buyer is interested in your company, but he does not have the necessary

> This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy’s Stereo City that reads something like this: “$1,500 Instant Credit! 18.4% Simple Interest! Three Years to Pa

> Two banks in the area offer 30-year, $320,000 mortgages at 4.9 percent and charge a $5,500 loan application fee. However, the application fee charged by Insecurity Bank and Trust is refundable if the loan application is denied, whereas that charged by I.

> In the previous problem, suppose that you believe that you will only live in the house for eight years before selling the house and buying another house. This means that in eight years, you will pay off the remaining balance of the original mortgage. Wha

> You are buying a house and will borrow $265,000 on a 30-year fixed-rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.6 percent. Alternatively, she tells you that you can “buy down”

> The interest rate on a one-year loan is quoted as 13 percent plus 3 points (see the previous problem). What is the EAR? Is your answer affected by the loan amount? Problem 62: You are looking at a one-year loan of $10,000. The interest rate is quoted as

> You are looking at a one-year loan of $10,000. The interest rate is quoted as 9.7 percent plus 2 points. A point on a loan is 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. The interest rat

> Consider the following abbreviated financial statements for Parrothead Enterprises: a. What is owners’ equity for 2020 and 2021? b. What is the change in net working capital for 2021? c. In 2021, Parrothead Enterprises purchased $2,7

> You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already decided

> This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year. The interest rate is 14.6 percent. You and the lender agree that the interest on

> Your company will generate $55,000 in annual revenue each year for the next seven years from a new information database. If the appropriate discount rate is 8.2 percent, what is the present value of the savings?

> An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure: Time ……………………………………………… Salary 0 ………………………………………….. $7,900,000 1 ………………………………………….. $4,500,000 2 ………………………………………….. $5,300,000 3 …………………………………

> After deciding to acquire a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $49,000. The dealer has a special leasing arrangement where you pay $5,100 today and $545 per month for the next three ye

> Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $16,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he wo

> Rework Problem 55 assuming that the loan agreement calls for a principal reduction of $11,700 every year instead of equal annual payments. Problem 55: Prepare an amortization schedule for a five-year loan of $58,500. The interest rate is 6 percent per y

> Prepare an amortization schedule for a five-year loan of $58,500. The interest rate is 6 percent per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loa

> You want to buy a new sports car from Muscle Motors for $64,500. The contract is in the form of a 60-month annuity due at an APR of 5.4 percent. What will your monthly payment be?

> Suppose you are going to receive $14,500 per year for five years. The appropriate interest rate is 7.1 percent. a. What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an

> Martinez Industries had the following operating results for 2021: Sales = $38,072; Cost of goods sold = $27,168; Depreciation expense = $6,759; Interest expense = $3,050; Dividends paid = $2,170. At the beginning of the year, net fixed assets were $22,79

> A five-year annuity of 10 $5,500 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 8 percent compounded monthly, what is the value of this annuity five years from now? What is the v

> A local finance company quotes an interest rate of 18.4 percent on one-year loans. So, if you borrow $20,000, the interest for the year will be $3,680. Because you must repay a total of $23,680 in one year, the finance company requires you to pay $23,680

> Given a discount rate of 4.6 percent per year, what is the value at Date t = 7 of a perpetual stream of $7,300 payments with the first payment at Date t = 15?

> If you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash flow be?

> You have your choice of two investment accounts. Investment A is a 13-year annuity that features end-of-month $1,600 payments and has an APR of 7.8 percent compounded monthly. Investment B is a 7 percent continuously compounded lump sum investment, also

> A 15-year annuity pays $1,750 per month, and payments are made at the end of each month. If the APR is 9 percent compounded monthly for the first seven years, and APR of 6 percent compounded monthly thereafter, what is the value of the annuity today?

> What is the value today of $5,100 per year, at a discount rate of 7.9 percent, if the first payment is received 6 years from today and the last payment is received 20 years from today?