Block 8

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Formulas

Chapter 2 1. Earnings per share (e.p.s.) 2. Payout ratio (2–2)

3. P/E ratio (2–3) 4. Dividend yield (2–4) 5. (2–5)

Chapter 3

 A. Profitability ratios— 1. Profit margin (3–1) 2. Return on assets (investment) (ROA)

a. b. (3–2)

3. Return on equity (ROE)

a. b. Equity multiplier  c. ROA Equity multiplier (3–3)

B. Asset utilization ratios 4. Receivables turnover  (3–4a ) Average collection period (3–4b )

5. Inventory turnover  (3–5a ) Inventory holding per iod (3–5b )

6. a . Accounts payable turnover  (3–6a ) b . Accounts payable period (3–6b )

7. Capital asset turnover  (3–7) 8. Total asset turnover   (3–8)

C. Liquidity ratios 9. Current ratio (3–9) 10. Quick ratio (3–10)

D. Debt Utilization Ratios 11. Debt to total assets (3–11) 12. Times interest earned (3–12)

13. Fixed charge coverage (3–13)

Chapter 4 1. RNF (S ) (S ) PS 2 (1 D) (4–1) 2. (4–2)

Chapter 5 1. CM P  VC (5–1) 2. BE (5–2) 3. DOL (5–4) 4. DFL (5–6)

5. E BIT* (5–7) 6. DCL DOL DFL (5–9) 7. DCL (5–10)

8. DOL 9. DFL 10. DCL

Chapter 7 1. (7–1a ) 2. (7–1b ) 3. (7–2) 4. TC (7–3)

Chapter 8 1. (8–1) 2. Amount to be borrowed 3. RANNUAL (8–2)

4. RDIS (8–3) 5. RCOMP (8–4) 6. RCOMP (8–5)

7. RINSTALL (8–6)2 Annual number of payments I 1Total number of payments 12 P 

I 

P  B

365

d 

I 

11 c 2I 

P  I 

365

d 

I 

P 

365

d 

Amount needed11 c 2 K DIS

d %

100% d %

365

 f  1date2 d 1date2SO

 Q 

CQ 

2EOQ   B 

2SO

C r  a1

100 P 

P b365

d  1r 

100 P 

P 

365

d 

 Q 1P  VC2 Q 1P  VC2 FC I 

S  TVC

S  TVC FC I 

EBIT

EBIT I 

 Q 1P  VC2 Q 1P  VC2 FC 

S  TVC

S  TVC FC

CM

EBT

1S B I  A S  A I B2S B S  A

EBIT

EBT

CM

EBIT

FC

CM

SGR 

P 11 D2  a1 DT 

E b

 A

S 1 P 

11 D

2 

a1

DT 

E b

L

S 1

 A

S 1

Income before fixed charges and taxes

Fixed charges

Income before interest and taxes

Interest

Total debt

Total assets

Current assets Inventory

Current liabilities

Current assets

Current liabilities

Sales

Total assets

Sales

Capital assets

Accounts payable

Average daily purchases 1COGS2Cost of goods sold

Accounts payable

Inventory

Average daily COGS

Cost of goods sold

Inventoryor 

Sales

Inventory

Accounts receivable

Average daily credit sales

Sales 1credit2Receivables

Total assets

Equity

Net income

Shareholders’ equity

Sales

Total assets

Net income

Sales

Net income

Total assets

Net income

Sales

Market value

Book value

MV

BV

Market value per share

Book value per share

Dividends per share

Market share price

Market share price

Earnings per share

Dividend per share

Earnings per share

Earnings available to common shareholders

Number of shares outstanding  12–12

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Chapter 9 1. FV PV(1 i )n (9–1) 2. (1 i )n 1 Effective interest rate (9–2) 3. PV FV (9–3) 4. FV A (9–4a )

5. FV A ABGN (9–4b ) 6. PV A A (9–5a ) 7. PV A ABGN (9–5b )

8. A FV A (9–6a ) 9. ABGN FV A (9–6b ) 10. A PV A (9–7a )

11. ABGN PV A (9–7b ) 12. PV (9–9) 13. PV (9–10) 14. PVn (9–11)

Chapter 10 1. (10–1) 2. P  p (10–3) 3. K  p (10–4) 4. P 0 (10–8)

5. K e  (10–9)(11–3)(11–5) 6. (10B–1) 7. P 3 (10B–2)

Chapter 11 1. K d  Y (1 T ) (11–1a ) 2. K d  (11–1b ) 3. K  p (11–2a ) 4. K  p (11–2b ) 5. K e  g  (11–3)

6. (11–4) 7. K  j  R f    j ( Rm R f  ) (11–5) 8. K  jn or  K  jn  K  j  (11–6)

9. (11–7) 10. (11–8)

11. (11A–1) 12. K  j  R f    j ( Rm R f  ) (11A–2) 13. (11B–1)

14. K a  K ea  (11B–2) 15. K eL K eu ( K eu I )(D/S ) (11B–3) 16. V L V U  TD (11B–4) 17. K eL K eu ( K eu I )(D/S )(1 T ) (11B–5 )

Chapter 12 1. [C  pv  S  pv ] (12–1)

Chapter 13 1.–

D DP  (13–1) 2. (13–2) 3. V  (13–3) 4. (13–4) 5. (13–5)

6. (13–6) 7. (13–7) 8. (13–8)

Chapter 17 1. 1 (17–1) 2. (17–2)

3. R (17–3) 4. R (17–4)

Chapter 19 1. Face value Conversion price Conversion ratio (19–1) 3. I  (M  E ) N  (19–3)

2. (19–2) 4. S  W  I  (19–4)

Chapter 21 1. Forward premium (discount) (21–1)Forward Spot

Spot

12

Contract length1months2

Diluted earnings per share Adjusted aftertax earnings

Shares outstanding Shares from conversion

P e  S 

N 

P o S 

N  1

Number of directors that can be elected 1Shares owned 12 1Total number of directors to be elected 121Total number of shares outstanding2Sharesrequired

Number of directors desired Total number of shares outstanding

Total number of directorsto be elected 1

AB

2  x A2

A2 x B

22B

2r AB

A

B x A x BAB

2  x A2

A2 x B

22B

2CovAB x A x Br AB

CovAB

AB

CovAB P 1D Di 2  1F  F i 2D p  x i Di D

2 1D D22P 

 a dT c 

r  d ba1 0.5r 

1 r bPV of 

CCA tax shield

V EBIT

 K a 

 K  j   j  Rm e 

Amount of lower-cost debt

% of equity in the capital

  structure

 Z °Size of the investmentsthat lower-cost debt

will support¢ X 

Retained earnings

% of equity in

the capital structure

aP 0

P nb K  j 

1 F  K n

D1

P 0

g 

1 F   or    K n aD

1

P 0

g b P 

0

P n

D1

P 0

DP 

P  p F

DP /P P 

1 F 

Y 11 T 21 F 

D4

 K e  g P 0 a

n

t 1

Dt 11 K e 2t  P n 

a 1

1 K e bnD1

P 0

g 

D1

 K e  g 

DP 

P P 

DP 

 K P 

P b  an

t 1

I t 11 Y 2 t 

P n11 Y 2n

 A1a 1

i  g b c1 a1 g 

1 i bn d A1

i  g 

 A

i £ i 

11 i 2 111 i 2n1

§

£ i 

1 111 i 2n

§c i 11 i 2n1 11 i 2 dc i 11 i 2n 1 d

£ 11 i 2 111 i 2n1

i 

§£ 1 111 i 2n

i 

§c 11 i 2n1 11 i 2i 

d A c 11 i 2n 1

i dc 111 i 2n

d

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