Fi 515 Week 2 Homework Essay
Days Sales Outstanding
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.
DSO = days sales outstanding = receivables / average sales per day = Receivable / (annual sales / 365)
20 = receivables / 20,000
Receivables = 20 * 20,000
Receivables = 400,000
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?
Equity Multiplier = 2.5
Therefore Equity Ratio = 1/EM
Equity Ratio = 1/2.5 = 0.40 the formula is:
Debt Ratio + Equity Ratio = 1
Therefore Debt …show more content…
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?
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?
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? your goal?
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?
Present Value of an Annuity
Find the present value of the following ordinary annuities (see the Notes to Problem 4-12).
a. $400 per year for 10 years at 10%
b. $200 per year for 5 years at 5%
c. $400 per year for 5 years at 0%
d. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. Year | Cash Stream A | Cash Stream B | 1 | $100 | $300 | 2 | 400 | 400 | 3 | 400 | 400 | 4 | 400 | 400 | 5 | 300 | 100 |
b. What is the value of each cash flow stream at a 0% interest