Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm’s observable market value, stock prices, and book values, integrating information from both the market and the firm’s financial statements.

Consider the case of Green Caterpillar Garden Supplies Inc.:

Green Caterpillar Garden Supplies Inc. just reported earnings after tax (also called net income) of $9,250,000 and a current stock price of $12.00 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 3,000,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,500,000).

If Green Caterpillar’s forecast turns out to be correct and its price/earnings (P/E) ratio does not change, what does the company’s management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.)

$9.71 per share

$12.00 per share

$7.28 per share

$12.14 per share

One year later, Green Caterpillar’s shares are trading at $55.80 per share, and the company reports the value of its total common equity as $16,507,000. Given this information, Green Caterpillar’s market-to-book (M/B) ratio is__.

Can a company’s shares exhibit a negative P/E ratio?

Yes

No

Which of the following statements is true about market value ratios?

Companies with high research and development (R&D) expenses tend to have low P/E ratios.

Companies with high research and development (R&D) expenses tend to have high P/E ratios.

Explain “child” in tax law and the conditions to apply for a tax relief that comes with a “child” in malaysia. [8 marks]

RATIO ANALYSIS

Data for Barry Computer Co. and its industry averages follow.

1. Calculate the indicated ratios for Barry. Round your answers to two decimal places.

   Ratio	Barry	Industry Average
   Current	x	2.28x
   Quick	x	1.36x
   Days sales outstandinga	days	24.40 days
   Inventory turnover	x	7.06x
   Total assets turnover	x	2.05x
   Profit margin	%	1.40%
   ROA	%	2.87%
   ROE	%	6.18%
   ROIC	%	7.00%
   TIE	x	2.54x
   Debt/Total capital	%	39.21%

   
   ^aCalculation is based on a 365-day year.
   
2. Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.

   	FIRM	INDUSTRY
   Profit margin	%	1.40%
   Total assets turnover	x	2.05x
   Equity multiplier	x	x

Kaye's Kitchenware has a market/book ratio equal to 1. Its stock price is $15 per share and it has 4.7 million shares outstanding. The firm's total capital is $135 million and it finances with only debt and common equity. What is its debt-to-capital ratio? Round your answer to two decimal places.

%

The most recent data from the annual balance sheets of Pellegrini Southern Corporation and Jing Foodstuffs Corporation are as follows:

Balance Sheet December 31st (Millions of dollars)

Pellegrini Southern Corporation’s current ratio is___, and its quick ratio is___; Jing Foodstuffs Corporation’s current ratio is___, and its quick ratio is___. Note: Round your values to four decimal places.

Which of the following statements are true? Check all that apply.

Pellegrini Southern Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Jing Foodstuffs Corporation.

If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening.

If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.

Pellegrini Southern Corporation has a better ability to meet its short-term liabilities than Jing Foodstuffs Corporation.

An increase in the current ratio over time always means that the company’s liquidity position is improving.

The Australian government issues bonds through a discriminatory variable rate auction.

Which of the following statements is correct?

Name at least 1 financial or operations-related statement that managers review monthly that provides insight into the performance of the business. What does the statement reveal to the manager and how does the manager use it to improve operations?

2. Ultimate Electric, Inc. has just developed a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As a result, Ultimate is expected to experience a 15 percent annual growth rate for the next five years. When the five-year period ends, other firms will have developed comparable technology, and Ultimate’s growth rate will slow to 5 percent per year indefinitely. Stockholders require a return of 12 percent on Ultimate’s stock. The firm’s most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.

a. Calculate the value of the stock today.

b. Calculate the dividend yield, Dˆ 1 /P0, the expected capital gains yield, and the expected total return (dividend yield plus capital gains yield) for this year. Calculate these same three yields for Year 5.

c. Suppose your boss believes that Ultimate’s annual growth rate will be only 12 percent during the next five years and that the firm’s normal growth rate will be only 4 percent. Under these conditions, what is the price of Ultimate’s stock?

d. Suppose your boss regards Ultimate as being quite risky and believes that the required rate of return should be higher than the 12 percent originally specified. Rework the problem under the conditions originally given, except change the required rate of return to (1) 13 percent, (2) 15 percent, and (3) 20 percent to determine the effects of the higher required rates of return on Ultimate’s stock price.

Twist Corp. has a current accounts receivable balance of $328,800. Credit sales for the year just ended were $4,192,200.

a. What is the company's receivables turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

b. What is the company's days' sales in receivables? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

c. How long did it take on average for credit customers to pay off their accounts during the past year? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Big Sky Mining Company must install $1.5 million of new machinery in its Nevada
mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the
machinery. Assume that the following facts apply.
(1) The machinery falls into the MACRS 3-year class.
(2) Under either the lease or the purchase, Big Sky must pay for insurance, property
taxes, and maintenance.
(3) The firm’s tax rate is 25%.
(4) The loan would have an interest rate of 15%. It would be nonamortizing, with only
interest paid at the end of each year for four years and the principal repaid at Year 4.
(5) The lease terms call for $400,000 payments at the end of each of the next 4 years.
(6) Big Sky Mining has no use for the machine beyond the expiration of the lease, and
the machine has an estimated residual value of $250,000 at the end of the 4th year.
a. What is the cost of owning?
b. What is the cost of leasing?
c. What is the NAL of the lease?

24.

The sustainable growth rate of a firm is best described as the

25.

Which of the following statements are correct?

I. Going-concern value of a firm is equal to the present value of expected future cash flows to owners and creditors.
II. When an acquiring firm purchases a target firm’s equity, the acquirer need not assume the target’s liabilities.
III. The market value of a public company reflects the worth of the business to minority investors.
IV. The fair market value of a business is usually the lower of its liquidation value and its going-concern value.

26.

The following information is available about Chiantivino Corp. (CC):

An activist investor is confident that by terminating CC’s money-losing fortified wine division, she can increase free cash flow by $4 million annually for the next decade. In addition, she estimates that an immediate, special dividend of $10 million can be financed by the sale of the division.

27.

Which of the following statements is/are correct?
I. Going-concern value of a firm is equal to the present value of expected net income.
II. When a buyer values a target firm, the appropriate discount rate is the buyer’s weighted-average cost of capital.
III. The liquidation value estimate of terminal value usually vastly understates a healthy company’s terminal value.
IV. The value of a firm’s equity equals the discounted cash flow value of the firm minus all liabilities.

28.

A recent annual income statement for Stone Creek Roofing is shown below.

Assume that during the year, Stone Creek spent $180 on new capital equipment and increased current assets net of non-interest-bearing current liabilities by $120. What was Stone Creek’s free cash flow in this year?

Need 300 words discussion, Identify and describe two (2) incremental cash flows from a proposed project such as expanding a product line or to launching a new product or service

Please don't rewrite already existing chegg answer

A loan of $100,000 is made today. The borrower will make equal repayments of $3418.16 per month with the first payment being exactly one month from today. The interest being charged on this loan is constant (but unknown).

For the following two scenarios, calculate the interest rate being charged on this loan, expressed as a nominal annual rate in percentage:

(a) The loan is fully repaid exactly after 33 monthly repayments, i.e., the loan outstanding immediately after 33 repayments is exactly 0.

(b) The term of the loan is unknown but it is known that the loan outstanding 2 years later equals to $32254.82.