Quiz1Solution

# Quiz1Solution - Quiz#1 Solutions Module 1 Chapters 2-4 FIN...

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Unformatted text preview: Quiz #1 Solutions: Module 1, Chapters 2-4 FIN 5405 J. Houston 1. Financial markets Answer: e Money markets are the markets for short-term highly liquid debt securities. Therefore, a short-term Treasury bill is an example of a money market instrument. The other statements are clearly false. 2. DuPont equation: basic calculation Answer: b Profit margin 5.1% TATO 1.60 Equity multiplier 1.80 ROE 14.69% 3. Dividends and retained earnings Answer: b Current RE \$150,000 Previous RE = Current RE + increment \$145,000 Change in RE \$5,000 Plus dividends paid \$26,000 = Net income \$31,000 4. Income statement: net income Answer: d Bonds \$4,000 Interest rate 7% Tax rate 40% Sales \$9,000 Operating costs excluding depr'n \$6,000 Depreciation \$1,500 Operating income (EBIT) \$1,500 Interest charges-\$280 Taxable income \$1,220 Taxes-\$488 Net income \$732 5. Maximum debt ratio consistent with a given TIE ratio Answer: b Assets \$600,000 Sales \$435,000 Operating costs \$350,000 Operating income (EBIT) \$85,000 TIE 4.04....
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Quiz1Solution - Quiz#1 Solutions Module 1 Chapters 2-4 FIN...

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