Question

In: Accounting

CORPORATE FINANCE 1.      Jason's opportunity cost rate is 8 percent compounded annually. How much must he...

CORPORATE FINANCE

1.      Jason's opportunity cost rate is 8 percent compounded annually. How much must he deposit in an account today if he wants to receive $5,400 at the end of each of the next 10 years? Nper = 10, Rate= 8, FV = 0, PMT = –5,400

2.      If Emma purchased a 5 year annuity and she pays $5000 in year 1, $300 in year 2, $2000 in year 3, $1500 in year 4, and $1000 in year 5, at a 5% rate, what is the worth of the investment today?

Complete the balance sheet and sales information in the table that follows for Isberg Industries using the following financial data:

Debt ratio: 50%

Quick ratio: 0.80x

Total assets turnover: 1.5x

Days sales outstanding: 36.0 days

Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25%

Inventory turnover ratio: 5.0x

Balance Sheet:

3.      Cash                                                                    Accounts payable                         

4.      Accounts receivable                                            Long-term debt                 $ 60,000

5.      Inventories                                                          Common stock                             

6.      Fixed assets                                                         Retained earnings              $ 97,500

7.      Total assets                                   $300,000      Total liabilities and equity           

8.      Sales                                                                    Cost of goods sold                       

Campsey Computer Company: Balance Sheet as of December 31                                                   

Cash                                $ 77,500      Accounts payable           $129,000

Receivables                      336,000      Notes payable                    84,000

Inventories                     241,500      Other current liabilities 117,000

      Total current assets $655,000      Total current liabilities $330,000

Net fixed assets              292,500      Long-term debt                256,500

                                                                  Common equity       361,000

      Total assets              $947,500      Total liabilities and equity $947,500

Campsey Computer Company: Income Statement for Year Ended December 31

Sales                                                                                        $1,607,500

Cost of goods sold                                                                   (1,353,000)

      Gross profit                                                                       $   254,500

Fixed operating expenses except depreciation                        (   143,000)

      Earnings before interest, taxes, depreciation,

           and amortization (EBITDA)                                        $   111,500

Depreciation                                                                            (     41,500)           Earnings before interest and taxes (EBIT)                                             $     70,000

Interest                                                                                     (     24,500)           Earnings before taxes (EBT)                                                                 $     45,500

Taxes (40%)                                                                            (     18,200)

      Net income                                                                        $     27,300

Using the information above, calculate the following ratios:

9.      Current ratio

10. Days sales outstanding

11. Inventory turnover

12. Total assets turnover

13. Net profit margin

14. Return on assets (ROA)                           

15. Return on equity (ROE)                          

Debt ratio                   

Solutions

Expert Solution

Campsey Computer Company

9.Current Ratio = Current Assets / Current Laibilities = 655000 / 117000 = 5.59

10.Days sales outstanding = (Accounts Receivables / Net Credit Sales ) x 365

                                        = (336000 / 1607500 ) x 365 = 76.29 days

11.Inventory turnover = Cost of goods sold / Average Inventory

                              = 1353000 / 241500 = 5.60

12.Total assets turnover = Sales / Total Assets

                                   = 1607500 / 947500 = 1.70

13.Net profit margin = Net Profit / Sales

                             = 27300 / 1607500 = 1.6982%

14.Return on assets (ROA) = Net Income / Total Assets

                                        = 27300 / 947500 = 2.88%

15.Return on equity (ROE) = Net income / Common Equity

                                        = 27300 / 361000 = 7.56%

16.Debt Ratio = Total Liabilities / Total Assets

                     = ( 330000 + 256500 ) / 947500 = 0.6189

Isberg Industries


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