3-6 Gardial & Son has an ROA of 12%, a 5% profit margin, and a return on equity equal to 20%.
What is the companys total assets turnover? What is the firms equity multiplier?
ROA=Profit Margin x Asset
TODAY:
Calculator setup
Mr. Burns lecture example
A few problems from Ch.2
1
2
3
4
Mr. Burns Lecture Example
Springfield mogul Montgomery Burns, age 85, wants to retire
at age 100 so he can steal c
Ch2 homework
1. 9%*(1-36%)=5.76%
2. let 8%*(1-x)=6%, so x=25%
3. NI=(EBIT-INT EXPENSE)*(1-T)
SO, INT EXPENSE=EBIT-NI/(1-T)=13-6/0.6=3
4. EBIT=NI/(1-T)+INT EXPENSE=2.4/0.6+2=6,
SO DEP EXPENSE=EBITDA-EB
1-2 Whatarethethreeprincipalformsofbusinessorganization?Whatarethe
advantagesanddisadvantagesofeach?
SoleProprietorship:ownedbyoneindividual
o Advantages:Easytoform,fewregulations,singletax
o Disadvan
Mapping out a solution
Mapping is a method of planning how you will go about solving a problem involving many steps.
Sometimes it is difﬁcult to map from data A into missing quantity B, and it is easi
xm-wn
Example 2
Now,consider another problem.
Let us assume that we wish to estimate how long we must wait for payment on invoices to a
prospective new customer, given that its sales equals 2500, its
rm.“
Accounting and Finance
Accounting and ﬁnance are fundamentally different disciplines. Accounting
is a methodology for summarizing past transactions; while ﬁnance is a
methodology for planning fut
Tracey Lemmons
FIN-6631
HW Week 2 Questions (3-6, 3-8, 3-13 a-c)
3-6
Donaldson & son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%.
What is the company's total assets turn
Tracey Lemmons
FIN-6631
HW Week 1 Questions (1-2, 1-3, 1-4, 1-7)
1-2
What are the three principal forms of business organization? What are the advantages and
disadvantages of each?
The three main form
Tracey Lemmons
FIN-6631
HW Week 3 Questions (4-1, 4-2, 4-6, 4-8, 4-6 Redone, 5-1, 5-7)
4-1
If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in
your account af
Tracey Lemmons
FIN-6631
HW Week 4 Questions (6-1, 6-2, 6-4, 6-9, 6-11, 7-1, 7-2, 7-12)
6-1
An individual has $55,000 invested in a stock with a beta of 0.8 and another $40,000 invested in
a stock with
Tracey Lemmons
FIN-6631
HW Week 6 Questions (8-3; 8-5; 9-2; 9-5; 9-7; 9-8)
8.3
Assume that you have been given the following information on Purcell Industries: According to
the Black-Scholes option pr
Tracey Lemmons
FIN-6631
HW Week 7 Questions (10-1; 10-2; 10-4; 10-5 10-6; 11-1; 11-2)
10-1
A project has an initial cost of $52,125; expected net cash inflows of $12,000 per year for 8
years, and a co
HW-26
26-1
a) N=20 YTM=13 PMT=3 FV=0, SO PV=-21.07
NPV=21.07-20=1.07 million
b) N=20 YTM=13 PMT=2.2 FV=0, SO PV=-15.45, NPV=-4.55
N=20 YTM=13 PMT=3.8 FV=0, SO PV=-26.69, NPV=6.69
IF NO WAITING,
E(NPV)
HW6
6-1
The calculations about the HW use Excel
20000/(20000+35000)=
0.36
.7*.36+1.3*.64=
1.084
6-2
R=.04+.8*(.12-.04)=10.4%
6-3
rm=5%+7%=12%
rs1=5%+1*7%=12%
rs2=5%+1.7*7%=16.9%
probability
0.1
w
0.2
HW-7
7-1 Expected dividend for
YEAR 1=1.5*1.05=1.575 YEAR 2=1.575*1.05=1.654
YEAR 3=1.654*1.05=1.736 YEAR 4=1.736*1.1=1.91
YEAR 5=1.91*1.1=2.1
7-2 P=1.5/(.13-.06)=21.43
7-5 r=.075+1.2*.04=.123 D3=2*1.
HW-12
12-1
AFN=(5/8)*(9.2-8)-(.9/8) (9.2-8) -6%*9.2*(1-.4)=.2838
12-2
AFN=(7/8)*(9.2-8)-(.9/8) (9.2-8) -6%*9.2*(1-.4)=.5838
The capital intensity ratio increases, so AFN increases.
12-5
a) Total long-