A firm has a benefit margin of 12 percent on sales that $10,000,000. If the certain has full assets that $16,500,000, and an after-tax interest price on total debt the 5 percent, what is the firm"s ROA?


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ROA= Net revenue / total Assets; and also Net Income=Sales*Profit MarginROA= (12% * 10,000,000) / 16,500,000 = 7.27%
You read in The wall Street newspaper that 30-day T-bills at this time are yielding 6 percent. Your friend, a broker in ~ Buffett Securities, has given you the following estimates of present interest price premiums:Inflation premium 2%Liquidity premium 1%Maturity risk premium 1%Default risk premium 3%What is the genuine risk-free rate of return (r*) based on the provided data?
T-bill price is supplied as a close substitute for the risk-free rate. Risk-free price = Inflation Premium + real risk-free rateRf= IP+r for this reason r
= Rf-IPr*= 6% - 2% = 4%
Assume the the expectations theory holds, and also that liquidity and maturity risk premiums are zero. If the yearly rate of attention on a 2-year Treasury link is 8 percent and also the rate on a 1-year Treasury bond that is issued today is 6 percent, what price of interest need to you expect on a 1-year Treasury bond issued one year native now?
According come the following information, which of the stocks would be considered riskiest in a diversified portfolio of investments? Stock typical deviation BetaAt&T 13% 0.9Apple 25% 1.9Google 20% 2.4Walmart 10% 0.5
Google need to be thought about the riskiest share in the portfolio since it has actually the highest beta. Full risk = industry Risk + Firm-specific risk. Us can get rid of firm-specific threat through diversification so the just risk we need to be pertained to with is the sector risk i m sorry is measure by beta
You very own $5,000 of at & t stock that has a beta the 1.2. You additionally own $12,500 the Microsoft (beta = 1.6) and $2,500 that Target (beta = 0.5). What is the beta of your portfolio?
Portfolio Beta:Weight is the relationship of her money invested in a stock.First, find the weights of each stock, then calculation portfolio beta.Weight of at & t = 5,000/20,000=0.25Weight that Microsoft = 12,500/20,000=0.625Weight that Target = 2,500/20,000=0.125Portfolio Beta = 0.251.2 + 0.625
1.6 + 0.125*0.5 = 1.36
A firm has a beta the 1.45. If the market return is expected to be 9 percent and also the risk-free rate is 2 percent, what is the company"s forced return based upon CAPM?
Required return based on CAPM = Rf+Beta*(Rm-Rf)where Rf is the risk-free price as measure by the T-bill"s rate and Rm is the sector return together approximated by the S&P 500 Index.r = 2% + 1.45*(9% - 2%) = 12.15%
Assume the you great to purchase a 5-year link that has actually a maturity value of $1,000 and makes semiannual attention payments of $60. If you require a 8 percent yield-to-maturity top top this investment, what is the best price you need to be willing to pay because that the bond?
Use a gaue won calculator to fix this problem: N= 10 (20*2=40 semiannual periods)I= 4 (10/2=5 semiannual interest rate)PV=? ($1,162.22) PMT= 60 (semiannual payments)FV= 1000 (maturity value)
Radio Shack to plan to issue bonds through a par worth of $1,000 and 15 year to maturity. This bonds will pay $40 interest every 6 months. Present market problems are such the the bonds will be marketed for $918.56. What is the productivity To Maturity on these bonds?
ANSWER: usage a jae won calculator to deal with this problem: N= 30 (15*2=30 semiannual periods)I=? 4.5% *2 = 9% YTMPV= ($918.56) (bond"s price)PMT= 40 (semiannual payments)FV= 1000 (maturity/par value)
A share of perpetual wanted stock pays an yearly dividend that $2 every share. If investors call for a 8 percent rate of return, what must be the price the this preferred stock?
Preferred share fits zero-growth model that help to calculation the share price by dividing the dividend payment by the required rate of return.P= 2/0.08 = 25
Financial experts forecast Brand Stores development for the future to it is in 10 percent. Their current dividend to be $0.83. What is the value of their stock when the forced rate of return is 12 percent?
g= 10%D0= 0.83r= 12%P0= 45.65The worth of this stock can be approximated by the constant growth design which is P0=(0.83 * (1+0.10)) / (0.12 - 0.10) = $45.65
As the manager of funding budgeting for Portland Corporation, girlfriend are analyzing two mutually exclusive projects with the complying with net cash flows: Year task X job Z 0 ($250,000) ($250,000) 1 200,000 10,000 2 60,000 60,000 3 35,000 100,000 4 10,000 200,000 If Portland"s compelled Rate of Return is 12 percent, which project(s) would certainly you choose?
: The firm will accept a task as lengthy as the NPV is over zero. Because that mutually exclusive projects, the certain should select the job with the greatest NPV. To find NPV, you have to use a jae won calculator: task X: ($250,000) CF0 task Z: ($250,000) CF0 200,000 CF1 10,000 CF1 60,000 CF2 60,000 CF2 35,000 CF3 100,000 CF3 10,000 CF4 200,000 CF4 12% I/Yr 12% I/Yr shift NPV= $7,670.55 shift NPV= $5,041.84 task X have to be preferred due to the fact that it has higher NPV.
You have actually just borrowed $8,000 come buy a supplied car. The loan agreement calls for 36 monthly payments of $243.38 every to start one month indigenous today. If the attention is compounded monthly, then what is the annual rate of attention on this loan?
At an effective yearly interest price of 8 percent, how countless years will it take it a given amount to quadruple (ex. Indigenous $1 to flourish to $4) in value? (Round to the closestly year.)
If $500 is inserted in an account the earns a basic 6 percent, compounded monthly, what will certainly it be worth in 5 years?
N= 60 (5*12=60 monthly periods)I= 0.5 (6/12=0.5 monthly attention rate)PV=? ($500.00) PMT= 0 FV= $674.43
If you buy a keep for $200,000 and the terms space 50 percent down, the balance to be paid turn off over 15 year at a 8 percent price of interest on the unpaid balance, what space the 15 equal annual payments?
Matt and also Erin are buying a $200,000 house. The interest price is at 5.00%, payment monthly, and is a thirty-year loan. They arrangement to lend the whole $200,000 because that the purchase. Exactly how much interest will certainly they pay over the next 30 years?
N= 360 (12*30=360 monthly periods)I= 0.417% (5/12=0.417% monthly rate)PV= $200,000 PMT=? ($1,073.64) FV= $0.00 utilizing HP 10BII calculator: First, solve for the pmt and also then click on:1 intake 360 transition AMORT == $186,511.57 An alternative way: first find the monthly payment. Second, main point the monthly payment by 360 and also subtract the principal amount native it. The result is the interest paid end the thirty year period. 360*1,073.64 - 200,000 = $186,510.40
You suppose to conserve $200 at the end of every month for the following three years towards a car. Your parents will provide you $2,000 now for friend to save towards the car. How much will certainly you have actually in 3 years, if you deserve to earn 12% every year on her savings towards the car?
N= 36 (3*12=36 monthly periods)I= 1% (12%/12=1 monthly interest rate)PV= -$2,000 PMT= -$200 FV=? $11,476.91
To raise money for the funding projects, Dell corporation plans the following capital structure: 30% of money will come indigenous issuing bonds, and 70% will certainly come native Retained earnings or new common stock. Dell does no have desired stock. Dell can worry bonds through an interest rate of 6%, approximately $20 million dollars. After ~ issuing $20 million in bonds, the interest expense will climb to 9%. The next dividend on typical stock is supposed to it is in $1.00 every share. The stock price is $17.00 per share, and is supposed to prosper at 5% per year. The flotation price for issuing new common stock is approximated at 15%. Dell Corporation has $50 million in retained revenue that have the right to be used. The tax rate for Dell is 35%.What is the initial load average cost of funding (WACC) for Dell Corporation?
WACC = wd rd(1-T) + wp rp + ws rsrs=based top top the details that is noted we need to use the dividend productivity plus expansion rate approach.rs=(D1/P0)+g = 1/17 + 0.05=0.1088 or 10.88%WACC= 0.36
(1-0.35) + 0 +0.7*10.88=8.79%
There space two breakpoints in Dell"s capital structure. In ~ what point does the first breakpoint occur?
Break Point1 = full Amount of Lower cost of resources / weight of debt(wd)Break Point1 = 20,000,000/0.3= $66,666,667
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