c. 12.35
d. 12.70
e. 13.05
8
.
Rand Corp's stock price at the end of last year was $40.00, and its book value
per share was $24.50.
What was its Market/Book ratio?
a. 1.03
b. 1.18
c. 1.33
d. 1.48
e. 1.63
9
.
Midwest Lumber had a profit margin of 5.1%, a total assets turnover of 1.6, and
an equity multiplier of 1.8.
What was the firm's ROE?
a. 14.39%
b. 14.69%
c. 14.99%
d. 15.29%
e. 15.59%
10
.
An investor is considering starting a new business. The company would require
$500,000 of assets, and it would be financed entirely with common stock.
The
investor will go forward only if she thinks the firm can provide a 15.0% return
on the invested capital, which means that the firm must have an ROE of 15.0%.
How much net income must be expected to warrant starting the business?
a. $45,000
b. $55,000
c. $65,000
d. $75,000
e. $85,000
11
.
Rolle Corp has $500,000 of assets, and it uses no debt--it is financed only
with common equity.
The new CFO wants to employ enough debt to bring the Debt/
Assets ratio to 45%, using the proceeds from the borrowing to buy back common
stock at its book value.
How much must the firm borrow to achieve the target
debt ratio?
a. $225,000
b. $240,000
c. $255,000
d. $270,000
e. $285,000
12
.
Rull Corp's assets are $500,000, and its total debt outstanding is $200,000.
The new CFO wants to employ a debt ratio of 60%.
How much debt must the
company add or subtract to achieve the target debt ratio?
a. $ 80,000