...(3-1) Days sales outstanding Green 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? Days of Sales Outstanding DSO= Receivables Average sales per day 20 days = Receivables Average sales per day Receivables= 20 days *$20,000 Receivables= $400,000 (3-2) Debt Ratio Vigo vacations has an equity multiplier of 2.5 .The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio EM= Equity Multiplier EM= TOTAL ASSETS TOTAL EQUITY EM= 2.5 = 2.5 1 Assets = Equity + Liabilities Liabilities= Assets - equity Liabilities= 2.5 - 1 = 1.5 Debt ratio= Total liabilities = 1.5 = 0.6 = 60% Total assets 2.5 (3-3) Market /Book Ratio Winston Washers’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? Market to book ratio= Market value per share Book value per share Book value per share= Common Equity = $6 billion = $7.50 # shares $800 million Market to-book ratio= Market price per share = $75...
Words: 1542 - Pages: 7
...FIN515 Homework Week # 3 Brian Jack D01609334 Managerial Finance briancjack@hotmail.com 03-23-2014 Professor: Paul Tovbin Chapter 5 29. Suppose the term structure of risk-free interest rates is as shown below: Top of Form |Term |1 year | |Treasury |3.1 | |AAA corporate |3.2 | |BBB corporate |4.2 | |B corporate |4.9 | • a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? • b. What is the credit spread on AAA-rated corporate bonds? • c. What is the credit spread on B-rated corporate bonds? • d. How does the credit spread change with the bond rating? Why? 30. HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the yield to maturity for five-year (annual-pay) coupon corporate...
Words: 538 - Pages: 3
...FIN515 Homework 3 CHAPTER 5 Problem (p. 164) 5-29 Term Interest Rate Structure a. Calculate the present value of an investment that pays $1000 in two years and $2000 in five years for certain. PV = (C1/1+r2) ^2+(C1/1+r5) ^5 PV = 1,000/(1 + 0.0241)^2 + (2,000/(1 + 0.0332)^5= $2,652.15 b. Calculate the present value of receiving $500 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average of the rate in year 3 and year 5.) r4 = (2.74 + 3.32)/2= 3.03 PV = 500/(1 + 0.0199)^1 + 500/(1 + 0.0241)^2 + 500/(1 + 0.0274)^3 +500/(1 + 0.0303)^4+500/(1 + 0.0332)^5 = $2,296.43 *c. Calculate the present value of receiving $2300 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.) Term yrs | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Rate (EAR, %) | 1.99 | 2.41 | 2.74 | 3.03 | 3.32 | 3.54 | 3.76 | 3.88 | 4 | 4.13 | 1+rate | 1.0199 | 1.0241 | 1.0274 | 1.0303 | 1.0332 | 1.0354 | 1.0376 | 1.0388 | 1.04 | 1.0413 | 2300/C^A | 2255.1 | 2193 | 2120.9 | 2041.1 | 1953.5 | 1866.7 | 1776.3 | 1695.8 | 1616 | 1534.5 | | | | | | | | | | | | Term yrs | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | Rate (EAR, %) | 4.21 | 4.29 | 4.37 | 4.45 | 4.53 | 4.61 | 4.64 | 4.77 | 4.85 | 4.93 | 1+rate | 1...
Words: 1470 - Pages: 6
