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Problems (p.112)

3-1 Days Sales Outstanding

Recivables Recivables Annual sales/365

DSO=

Days Sales Outstanding = Average sales per day

20 = RECEV/$20,000 $20000*20= RECEV RECEV = $400,000

o Debt ratio = 1-equity ratio

3-2 Debt Ratio

Equity ratio = 1/Equity multiplier Em=2.5 1/2.5=ER ER=.4 1-.4=Debt ratio DR=.6 or 60% o
BVPS=CE/SO M/B ratio=MPPS/BVPS CE= 6 BILLION SO=800 MILLION MPPS=$75 6000/800=bvps =7.5 $75/$7.50=M/B RATIO = 10.0

3-3 Market/Book Ratio

o
PRICE/EARNINGS RATIO

3-4 PE Ratio

PE RATIO =PRICE PER SHARE/EARNINGS PER SHARE PE=PPS/EPS EPS=1.50 CFPS=3.00 P/C RATIO= 8.0 , P/C RATIO= PPS/CFPS , 8.0=PPS/3.00 =3.00*8.00=PPS ,PPS=24.00 p/e RATIO = 24.00/EPS, 24.00/1.5, P/E RATIO = 16.0

3-5 ROE

ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity)

PM 3%

EM=2.0

SALES=100 MILLION TOTAL ASSETS=50 MILLION TOTAL ASSET TURNOVER= SALES/ASSETS TAT= 100m/50M= 2MIL ROE= Pm=.03*TAT=2MIL*EM=2.0, ROE=.03*2MIL*2.0, ROE= .12 OR 12%

o
ROA=10%, PM=2%,

3-6 Du Pont Analysis

ROE=15%

TOTAL ASSET TURNOVER ROA=PM*TAT TAT = ROA/PM, TAT=.10/.02, TAT=5.0

EQUITY MULTIPLIER ROE=ROA*EM EM=ROE/ROA, EM=.15/.10, EM=1.5

3-7 Current and Quick Ratios

CURRENT ASSETS= 3 MIL , CURRENT RATIO=1.5, QUICK RATIO=1.0 CURRENT LIABILITES CR=CA/CL, 1.5=3MIL/CL, CL*1.5=3MIL, CL=3MIL/1.5

CURRENT LIABILITES= 2 MIL LEVEL OF INVENTORIES QR=CURRENT ASSETS-INVENTORIES/CURRENT LIABILITES 1.0=3MIL-INV/2MIL, 1.0*2MIL=3MIL-INV, LEVEL OF INVETORIES =1MIL 2MIL-3MIL=INV

Problems (pp. 165-167) o 4-1 FV of Single Amount

Deposit 10,000 in a bank account that pays 10% intrest how much would be in your account after 5 years FV1 =PV+INT =PV+PV(I) =PV(1+I) =10,000(1+.10)=10,000(1.10)=11000 FV5=10,000(1.10)5= 16105.1

4-2 PV of Single Amount

PV of a security that will pay 5000 in 20 yrs and pay 7% annually PV=FVn/(1+I)n
Pv=1292.09

4-6 FV of Ordinary Annuity

Fv of an 7% 5 year ordinary annuity that pays 300 each year. If this had to be paid what would be due? Year 0-0 Year 1=300 Year 2=300(1.07)1=321 Year 3=300(1.07)2=343.47 Year 4=300(1.07)3=367.51 Year 5=300(1.07)4= 393.24 FV =1725.22 If this was due that amount would be 1845.99

4-13 a PV of an Annuity

Find Present Value of the following Ordinary annuities a)400 per year at 10% for 10 years =2457.83 b) 200 per year at 5% for 5 years= 865.90 c)400 per year at 0% for 5 years= 2000 d) rework parts a,b,c, assuming that payments are madeat the beginning of each year that is they are annuities due a)2703.61 B)909.20 C)2000

4-14 PV Uneven Cash Flow Stream

Year 1 2 3 4 5 Present Value Present Value 8% 0%

Cash Stream A Cash Stream B 100 300 400 400 400 400 400 400 300 100 $1,251.25 $1,600.00 $1,300.32 $1,600.00