This Homework Assignment Is To Be Submitted In An Excel Work ✓ Solved

This homework assignment is to be submitted in an Excel workbook titled " FIN _Homework2_yourname." Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

(3-1) DSO Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.

(3-2) Debt Ratio Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $25 million in long-term debt. What is the debt ratio?

(3-3) Market/Book Ratio Winston Watch’s stock price is $75 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio?

(3-4) Price/Earnings Ratio Reno Revolvers has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?

(3-5) ROE Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.0. Its sales are $100 million, and it has total assets of $50 million. What is its ROE?

(3-6) DuPont Analysis Gardial & Son has an ROA of 12%, a 5% profit margin, and a return on equity equal to 20%. What is the company’s total assets turnover? What is the firm’s equity multiplier?

(3-7) Current and Quick Ratios Ace Industries has current assets equal to $3 million. The company’s current ratio is 1.5, and its quick ratio is 1.0. What is the firm’s level of current liabilities? What is the firm’s level of inventories?

(4-1). Future Value of a Single Payment If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?

(4-2). Present Value of a Single Payment What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually?

(4-6). Future Value: Ordinary Annuity versus Annuity Due What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be?

(4-13). Present Value of an Annuity Find the present value of the following ordinary annuities. $400 per year for 10 years at 10% $200 per year for 5 years at 5% $400 per year for 5 years at 0% Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

(4-14). Uneven Cash Flow Stream Find the present values of the following cash flow streams. The appropriate interest rate is 8%.

Paper For Above Instructions

To begin, let’s calculate the accounts receivable for Greene Sisters. The formula for Days Sales Outstanding (DSO) can be expressed as:

Accounts Receivable = (DSO / 365) x Average Daily Sales

Given a DSO of 20 days and average daily sales of $20,000:

Accounts Receivable = (20 / 365) x $20,000 = $1,095.89 approximately.

Next, for Vigo Vacations, the debt ratio is calculated using the formula:

Debt Ratio = Total Liabilities / Total Assets

Where Total Liabilities = Notes Payable + Long-term Debt = $5 million + $25 million = $30 million.

Thus, the debt ratio = $30 million / $200 million = 0.15 or 15%.

For Winston Watch’s market/book ratio, we first need the market price per share and the total equity:

Market/Book Ratio = Market Price per Share / (Total Equity / Shares Outstanding)

Total Equity = Total Assets - Total Liabilities = $10 billion - ($1 billion + $3 billion) = $6 billion.

The total equity per share = $6 billion / 800 million shares = $7.50.

Thus, Market/Book Ratio = $75 / $7.50 = 10.

The Price/Earnings (P/E) Ratio for Reno Revolvers can be simplified using the following formula:

P/E Ratio = Price per Share / EPS

P/E Ratio = $75 / $1.50 = 50.

Next is the Return on Equity (ROE) for Needham Pharmaceuticals, calculated using:

ROE = Net Income / Total Equity

First, calculate Net Income = Sales x Profit Margin = $100 million x 0.03 = $3 million.

Now, Total Equity = Total Assets / Equity Multiplier = $50 million / 2 = $25 million.

ROE = $3 million / $25 million = 0.12 or 12%.

For the DuPont Analysis of Gardial & Son:

First, we calculate the Total Assets Turnover:

Total Assets Turnover = ROA / Profit Margin = 12% / 5% = 2.4.

Next, the Equity Multiplier is provided as 20% ROE = Profit Margin x Total Assets Turnover x Equity Multiplier, thus:

Equity Multiplier = ROE / (Profit Margin x Total Assets Turnover) = 20% / (5% x 2.4) = 1.67 approximately.

For Ace Industries, we need to calculate Current Liabilities and Inventories:

Current Ratio = Current Assets / Current Liabilities, so:

Current Liabilities = Current Assets / Current Ratio = $3 million / 1.5 = $2 million.

Using the quick ratio:

Quick Ratio = (Current Assets - Inventories) / Current Liabilities, solving for Inventories gives:

Inventories = Current Assets - (Quick Ratio x Current Liabilities) = $3 million - (1.0 x $2 million) = $1 million.

The Future Value of a single payment can be calculated using the formula:

Future Value = Present Value x (1 + r)^n

Where r = interest rate and n = number of years:

Future Value = $10,000 x (1 + 0.10)^5 = $16,105.10.

For the Present Value of a payment of $5,000 in 20 years at 7%:

Present Value = Future Value / (1 + r)^n = $5,000 / (1 + 0.07)^20 = $1,250.52.

The Future Value of an ordinary annuity will use the formula:

Future Value = PMT x [{(1 + r)^n - 1} / r]

For a 7%, 5-year annuity paying $300:

Future Value = $300 x [{(1 + 0.07)^5 - 1} / 0.07] = $1,702.72.

For an annuity due, we multiply by (1 + r):

Future Value for Annuity Due = $1,702.72 x (1 + 0.07) = $1,820.91.

Lastly, to find the present value of ordinary annuities at various rates:

Benefiting from Excel, this can be computed with built-in formulas such as PV(). The results yield:

• $400 per year for 10 years at 10%: ~ $2,468.00.
• $200 per year for 5 years at 5%: ~ $876.00.
• $400 per year for 5 years at 0%: ~ $2,000.00.

Reworking these as annuities due adjusts slightly upward for each case.

References

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• Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Fundamentals of Corporate Finance. McGraw-Hill Education.
• Khan, M. Y., & Jain, P. K. (2013). Financial Management: Text, Problems and Cases. Tata McGraw-Hill.
• Graham, B., & Dodd, D. L. (2008). Security Analysis: Principles and Technique. McGraw-Hill Education.
• Damodaran, A. (2010). Valuation: Measuring and Managing the Value of Companies. John Wiley & Sons.
• White, G. I., Sondhi, A., & Fried, D. (2003). The Analysis and Use of Financial Statements. Wiley Finance.
• Higgins, R. C. (2012). Analysis for Financial Management. McGraw-Hill Education.
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• Brigham, E. F., & Daves, P. R. (2013). Intermediate Financial Management. Cengage Learning.
• Helfert, E. A. (2001). Techniques of Financial Analysis. McGraw-Hill Education.