P12-17Deep RecessionHealth CareSuperheated EconomySteel
ProductionHealthy ExpansionHousing ConstructionStagflationGold
Mining
P12-22
a) The return is going to depend on the 30 days interest rates
at the moment of rolling over maturing securities.b) Since this
option offers a 4.5% holding period return, if we forecast that the
money market instruments will rise significantly, the first option
might be more effective.c) If the interest rates rise during the
year, you could end up with less than a 4.5% HPR. Also, if the
yield to maturity rises above 6%, the bonds price would fall.
P13-8EBIT$300.00tax rate35%Depreciation$20.00Capital
Expenditures$60.00Increase in Working Capital$30.00Free Cash
Flow$125.00
P13-9Free Cash Flow$205.00Interest Expense$22.00tax
rate35%debt increase$3.00FCFE growt3%Cost of
Equity12%FCFE193.70Market Value of Equity2152.22
P13-14ROE20%a)Price$23.33Plowback
ratio0.3P/E$11.67Earnings$2.00Expected Rate of Return12%b)Present
Value of Growth OpportunitiesPVGO$6.67Plowback ratio b0.2c)Impacts
of Reducing the Plowback RatioPrice b$20.00P/E
b$10.00PVGO$3.33
P13-17a)Dividend$8.00Capitalization Rate10%Rate5%Constant
Growth$160.00b)Rate5%Plowback Ratio0.33ROE0.15c)Expected Earnings
Returns12Consant Growth160Capitalization Rate10%P/E
Ratio$40.00
P14-1a)Cost of Goods Sold$2,850,000.00f)EBIT870000Average
Inventories$485,000.00Interest Expense130000Inventory Turnover
Ratio5.88Interest Coverage
Ratio6.69b)Debt$3,340,000.00g)EBIT130000Equity$960,000.00Sales$5,500,000.00Debt
to Equity Ratio3.48Operating Margin15.82%c)Net
Income$410,000.00h)Net Income410000Depreciation$280,000.00Average
Shareholder's Equity885000Change in Air$30,000.00Return on
Equity46.33%Change in Inventory-$10,000.00Change in
AP-$110,000.00i)The P/E Cannot be calculated because the market
price was not providedCF Form Operations$600,000.00j)Pretax
Profit740000d)Average AR$675,000.00EBIT870000Annual
Sales$5,500,000.00Average Assets4155000Average Collection
Ratio44.80Average Equity885000Compound Leverage
Ratio3.99e)Sales$5,500,000.00Average Total Assets$4,155,000.00Asset
Turnover Ratio1.32
P14-8Leverage Ratio2.2Total Asset Turnover2Net Profit
Margin5.50%Dividend Payout Ratio31.80%Return on Equity24.20%
