3-1 Daily Sales Outstanding = 20 days;
Average daily sale = $20,000;
Accounts receivable/Sales = Daily sales outstanding
AR/20000 = 20 AR = 20,000 x 20 = 400,000

3-2
Multiplier equity/Asset = 2.5; 1+x = 2.5 X = 2.5 -1.00 = 1.5
Debt Ratio = TL/TA
1.5/2.5 = 0.60 which is 60%

D/A = 1-0.40 = 0.60 or 60%
3-3
Book value per share = Common equity/ Shares outstanding
Book Value = 6,000,000,000/800,000,000 = 7.50

Market/book ratio = Market price per share/Book value per share =75/7.50 = 10

3-4
Price /cash flow per share = price cash flow ratio
P/$3.00 = 8 x 3 = $ 24.00

P/E = $24.00/$1.50 =16.00

3-5
Profit margin x Total assets turn over x Equity multiplier = ROE
=3% x 100,000,000/$50,000,000 x 2 = 12%.
ROE = 12%

3-6
ROA = 10%
Profit Margin = 2% Return on Equity = 15%

Net income/Assets = Net income/Sales x Sales/Total assets
2%x S/TA =10% S/TA = 5.
Net income/Equity = Net Income/Sales x Sales/Total Assets x Total Assets/Equity 2% x 5 x Total Assets/equity= 15% 10% x TA/E = 15%
TA/E = 1.5.

3-7
Current asset/Current liability =Current Ratio
3,000,000/CL = 1.5
3,000,000 = 1.5CL
CL = 2,000,000 CA – Inv /CL = 1.0
Therefore
Current Assets – Inventory/Current Liability = Quick Ratio
3,000,000 - Inv / 2,000,000 = 1.0
3,000,000 – Inv = 2,000,000
Inventory = 1,000,000

For these questions I used a financial calculator http://www.arachnoid.com/lutusp/finance.html 4-1
= 10,000(1.10) to the power 5
= 10,000(1.61051) FV= 16,105.10.

4-2
N = 20,
I/YR = 7,
PMT = 0, and
FV = 5000.
PV = $1,292.10.

4-6

N = 5,
I/YR= 7,
PV = 0, and
PMT = 300. FV = 1,725.22.

4-13 a. N = 10,
I/YR= 10,
PMT = -400, and
FV = 0. PV = 2,457.83.

4-14

NPV for cash stream A at an 8% is $1,251.25. Calculation from Chapter 4 Toolkit in Doc sharing

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