Question

40.)

Income Statement for Xenon Manufacturing:

                                                             2008         2009

Total sales                                          202           212

Cost of sales                                    -148          -172

Gross Profit                                         54              40

Selling, general,

and administrative expenses       -22            -20

Research and development             -8               -7

Depreciation and amortization      -4              -3

Other income                                        4                6

Earnings before interest

and taxes (EBIT)                                24              16       

Interest income (expense)               -7              -4

Pretax income                                     14              12

Taxes                                                       -4               -3

Net Income                                          10                9

Consider the above Income Statement for Xenon Manufacturing. All values are in millions of dollars. If Xenon Manufacturing has 20 million shares outstanding, what is its EPS in 2008?

	a.	$0.50
	b.	$0.25
	c.	$0.40
	d.	$0.60

50.)

If a bank offers you a loan that is payable month at a 10% APR or a 10% EAR, which would have higher monthly payments?

	a.	10% APR
	b.	10% EAR
	c.	they would have the same monthly payments.
	d.	you can not tell from the information given.

53.

Ford Motor Company had realized returns of 15%, 30%, -15%, and -30% over four years. What is the yearly standard deviation of returns for Ford?

a. 24.7%
b.		32.9%
c		27.4%
d		30.1%

Answer 1

Ques-40)

Formula for EPS:-

EPS = Net Income/No of Shares Outstanding

EPS for 2008 = $10 million/20 million shares

= $0.5 per share

Hence, Option A

Ques-50)

EAR = 20%

APR = 10% with monthly compounding (Since monthly payments)

Calculating APR 10% compounding monthly to EAR:-

where, r = APR = 10%

m = no of times compounding in a year = 12

EAR = 1.1047 - 1

EAR = 10.47%

So, APR 10% will have higher payments

Hence, Option A

Ques-53)

Calculating Standard Deviation of returns of Ford:-

Year	Stock Return (R) (%)	[(R) - E(R)]	[(R) - E(R)]^2
1	15.00	15.00	225.0000
2	30.00	30.00	900.0000
3	-15.00	-15.00	225.0000
4	-30.00	-30.00	900.0000
	0.00		2250.0000

Average Return, E(R)

=0%

Standard Deviation

= 27.4%

So, Standard Deviation is 27.4%

Hence, Option C