Essay on Finance 350 Solutions, Eight Edition

8215 Words Oct 7th, 2015 33 Pages
SOLUTIONS TO END OF CHAPTER ASSIGNED PROBLEMS

3-2 NI = $3,000,000; EBIT = $6,000,000; T = 40%; Interest = ? Need to set up an income statement and work from the bottom up.

EBIT $6,000,000 Interest 1,000,000 EBT $5,000,000 EBT = Taxes (40%) 2,000,000 NI $3,000,000 Interest = EBIT – EBT = $6,000,000 – $5,000,000 = $1,000,000.

3-3 EBITDA $7,500,000 (Given) Depreciation 2,500,000 Deprec. = EBITDA – EBIT = $7,500,000 – $5,000,000 EBIT $5,000,000 EBIT = EBT + Int = $3,000,000 + $2,000,000

Interest 2,000,000 (Given) EBT $3,000,000 Taxes (40%) 1,200,000 Taxes = EBT × Tax rate NI $1,800,000 (Given)
…show more content…
Total debt to total capital = = = 44%.

4-3 ROA = 10%; PM = 2%; ROE = 15%; S/TA = ?; TA/E = ? ROA = NI/TA; PM = NI/S; ROE = NI/E. ROA = PM S/TA NI/TA = NI/S S/TA 10% = 2% S/TA S/TA = 5. ROE = PM S/TA TA/E NI/E = NI/S S/TA TA/E 15% = 2% 5 TA/E 15% = 10% TA/E TA/E = 1.5.

4-4 TA = $10,000,000,000; CL = $1,000,000,000; LT debt = $3,000,000,000; CE = $6,000,000,000; Shares outstanding = 800,000,000; P0 = $32; M/B = ? Book value = = $7.50. M/B = = 4.2667. 4-5 EPS = $2.00; BVPS = $20; M/B = 1.2; P/E = ? M/B = 1.2× P/$20 = 1.2× P = $24.00. P/E = $24.00/$2.00 = 12.0.

4-6 NI/S = 2%; TA/E = 2.0; Sales = $100,000,000; Assets = $50,000,000; ROE = ? ROE = NI/S S/TA TA/E = 2% $100,000,000/$50,000,000 2 = 8%. 4-8 Step 1: Calculate total assets from information given. Sales = $6 million.

3.2 = Sales/TA 3.2 = Assets = $1,875,000.

Step 2: Calculate net income.
Equity = 0.5 × Total assets = 0.5 × $1,875,000 = $937,500. ROE = NI/S S/TA TA/E 0.12 = NI/$6,000,000 3.2 $1,875,000/$937,500 0.12 = $720,000 = 6.4NI $112,500 = NI.

4-11 We are given ROA = 3% and Sales/Total assets = 1.5. From the DuPont

Related Documents