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# ch4solutions - Solutions of End-of-Chapter Problems 4-1 DSO...

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Unformatted text preview: Solutions of End-of-Chapter Problems 4-1 DSO = 40 days; S = \$7,300,000; AR = ? DSO= 365 S AR 40 = /365 000 , 300 , 7 \$ AR 40 = AR/\$20,000 AR = \$800,000. 4-2 A/E = 2.4; D/A = ? 58.33%. = 0.5833 = A D 2.4 1 1 = A D A/E 1 1 = A D - - 4-3 ROA = 10%; PM = 2%; ROE = 15%; S/TA = ?; TA/E = ? ROA = NI/A; PM = NI/S; ROE = NI/E. ROA = PM × S/TA NI/A = NI/S × S/TA 10% = 2% × S/TA S/TA = TATO = 5. ROE = PM × S/TA × TA/E NI/E = NI/S × S/TA × TA/E 15% = 2% × 5 × TA/E 15% = 10% × TA/E TA/E = EM = 1.5. 4-4 TA = \$10,000,000,000; CL = \$1,000,000,000; LT debt = \$3,000,000,000; CE = \$6,000,000,000; Shares outstanding = 800,000,000; P = \$32; M/B = ? Book value = 000 , 000 , 800 000 , 000 , 000 , 6 \$ = \$7.50. M/B = 50 . 7 \$ 00 . 32 \$ = 4.2667. 4-5 EPS = \$2.00; CFPS = \$3.00; P/CF = 8.0 × ; P/E = ? P/CF = 8.0 P/\$3.00 = 8.0 P = \$24.00. P/E = \$24.00/\$2.00 = 12.0 × . 4-6 PM = 2%; EM = 2.0; Sales = \$100,000,000; Assets = \$50,000,000; ROE = ? ROE= PM × TATO × EM = NI/S × S/TA × A/E = 2% × \$100,000,00/\$50,000,000 × 2 = 8%. 4-7 Step 1: Calculate total assets from information given. Sales = \$6 million. 3.2 × = Sales/TA 3.2 × = Assets 000 , 000 , 6 \$ Assets= \$1,875,000. Step 2: Calculate net income. There is 50% debt and 50% equity, so Equity = \$1,875,000 × 0.5 = \$937,500. ROE = NI/S × S/TA × TA/E 0.12 = NI/\$6,000,000 × 3.2 × \$1,875,000/\$937,500 0.12 = 000 , 000 , 6 \$ NI 4 . 6 \$720,000 = 6.4NI \$112,500 = NI. 4-8 ROA = 8%; net income = \$600,000; TA = ? ROA= TA NI 8% = TA 000 , 600 \$ TA = \$7,500,000. To calculate BEP, we still need EBIT. To calculate EBIT construct a partial income statement: EBIT \$1,148,077 (\$225,000 + \$923,077) Interest 225,000 (Given) EBT \$ 923,077 \$600,000/0.65 Taxes (35%) 323,077 NI \$ 600,000 BEP = TA EBIT = 000 , 500 , 7 \$ 077 , 148 , 1 \$ = 0.1531 = 15.31%....
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ch4solutions - Solutions of End-of-Chapter Problems 4-1 DSO...

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