What new debt ratio, along with the 12% profit margin, is required to double the ROE?
70 percent
15.
The Local Company is a relatively small, privately owned firm.
In 1981 Local had an
after-tax income of $15,000, and 10,000 shares were outstanding.
The owners were
trying to determine the equilibrium market value for Local's stock, prior to taking the
company public.
A similar firm that is publicly traded had a price/earnings ratio of 5.0.
Using only the information given, estimate the market value of one share of Local's
stock.
$7.50
5

16.
Epsilon Co.'s records have recently been destroyed by fire. Given the following bits of
information saved from the inferno, determine Epsilon's net income for 1999.
Return on equity
22%
Assets/net worth
2.167
Profit margin
5.6%
Total assets
$650 million
$
66.00 million
17.Delta Corp. has sales of $300,000, a profit margin of 6.5 percent, a tax rate of 15 percent, and annual interest charges of $7,500. What is Delta's times interest earned?
18.
Coastal Packaging ‘s ROE last year was only 3 percent, but its management has
developed a new operating plan designed to improve things.
The new plan calls for a
total debt ratio of 60 percent, which will result in interest charges of $300 per year.
Management projects an EBIT of $1,000 on sales of $10,000, and it expects to have a
total asset turnover ratio of 2.0.
Under these conditions, the average tax rate will be 30
percent.
If the changes are made, what return on equity will Coastal earn?
24.5 percent
19.Yohe Inc. has an ROA of 13.4% and a 10% profit margin. The company has sales equal to $5 million. What are the company's total assets?
20.Yohe Inc. has a current ratio of 2, and a quick ratio of 1.4. Furthermore, the firm has $1.5million in current liabilities. Based upon this information, how much inventory is Yohe holding?
21.
U KNO, Inc. uses only debt and common equity funds to finance its assets. This past
year the firm's return on total assets was 13%. The firm financed 42% percent of its
assets using debt. What was the firm's return on common equity?
22.41%
22.
Cleveland Corporation has 17,490,000 shares of common stock outstanding, its net
income is $194 million, and its P/E ratio is 15.1. What is the company’s stock price?
$167.49
23.AAA's inventory turnover ratio is 11.09 based on sales of $15,200,000. The firm'scurrent ratio equals 3.22 with current liabilities equal to $970,000. What is the firm's quick ratio?

1.
Interest rates on one-year Treasury securities are currently 5.6 percent, while two-year
Treasury securities are yielding 6 percent.
If the pure expectations theory is correct,
what does the market believe will be the yield on one-year securities one year from
now?
6.4 percent
2.
Interest rates on four-year Treasury securities are currently 7 percent, while interest
rates on six-year Treasury securities are currently 7.5 percent.
If the pure expectations
theory is correct, what does the market believe that two-year securities will be yielding
four years from now?

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