HW1 Answers - FIN U201 Homework Assignment 1 Fall 2007...

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FIN U201 - Homework Assignment 1 Fall 2007 - Goettle Question 1 Quick ratio 0.9 times Fixed asset turnover 1.6 times Days' sales outstanding (360-day year) 30 days Debt-asset ratio 40.0% Equity-asset ratio 60.0% Times interest earned 6 times Profit margin 6.25% Return on assets 6.67% Return on equity 11.11% Investor supplied operating capital 3900 $million Economic value added (EVA) 9 $million Market value added (MVA) 300 $million MVA per share 10 $ Question 2 a. Increases b. Increases c. Decreases d. Increases e. Decreases f. Decreases Question 3 Inflation (annual rate in %) Year 1 2.0 4-year inflation premium 2.25 Year 2 2.0 6-year inflation premium 2.50 Year 3 2.5 Year 4 2.5 6-year Treasury yield 6.00 Year 5 3.0 4-year Treasury yield 5.00 Year 6 3.0 4-year maturity risk premium 0.25 Real, risk-free rate of interest (%) 2.5 Calculated Forward Rates
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Question 4 Security Maturities bought at 1-Year 2-Year 3-Year 4-Year Maturity (years to maturity, bought today) Yield (%) end of year Security
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HW1 Answers - FIN U201 Homework Assignment 1 Fall 2007...

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