1)Jiminy Cricket Removal has a profit margin of 10 percent, total asset turnover
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Question
1)Jiminy Cricket Removal has a profit margin of 10 percent, total asset turnover of 1.10, and ROE of 14.36 percent.
What is this firm’s debt-equity ratio?
5)We are evaluating a project that costs $924,000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 87,600 units per year. Price per unit is $34.55, variable cost per unit is $20.80, and fixed costs are $756,000 per year. The tax rate is 35 percent, and we require a return of 13 percent on this project.
Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).)
2)In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $400 in March 2042, but investors would receive nothing until then. Investors paid DMF $200 for each of these securities; so they gave up $200 in March 2012, for the promise of a $400 payment 30 years later.
(a)
Assuming that you purchased the bond for $200, what rate of return would you earn if you held the bond for 30 years until it matured with a value $400? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
(b)
Suppose under the terms of the bond you could redeem the bond in 2022. DMF agreed to pay an annual interest rate of .8 percent until that date. How much would the bond be worth at that time? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
(c)
In 2022, instead of cashing in the bond for its then current value, you decide to hold the bond until it matures in 2042. What annual rate of return will you earn over the last 20 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
3)Assume you deposit $4,100 at the end of each year into an account paying 9.75 percent interest.
How much money will you have in the account in 21 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
How much will you have if you make deposits for 42 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
4)We are evaluating a project that costs $940,000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 88,000 units per year. Price per unit is $34.75, variable cost per unit is $21.00, and fixed costs are $760,000 per year. The tax rate is 30 percent, and we require a return of 13 percent on this project.
Calculate the base-case cash flow and NPV. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)
If there is a 500-unit decrease in projected sales, how much would the NPV drop? (Do not round intermediate calculations. Input your answer as a positive value. Round your answer to 2 decimal places (e.g., 32.16).)
What is the sensitivity of OCF to changes in the variable cost figure? (A negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)
If there is $1 decrease in estimated variable costs, how much would the increase in OCF be? (Round your answer to the nearest whole dollar amount (e.g., 1,234,567).)
1)Jiminy Cricket Removal has a profit margin of 10 percent, total asset turnover of 1.10, and ROE of 14.36 percent.
Explanation / Answer
1. Let us assume net income to be $100.
Profit margin = Profit earned / Revenue
Therefore, 100 / Revenue = 10%
Revenue = $1,000
Total Assets Turnover = Sales / Total Assets
Therefore, 1.1 = 1000/ Total Assets
Total Assets = 909.09
ROE = Net Income / Shareholders' Equity
14.36% = 100 / Shareholders' Equity
Shareholders' Equity = 696.39
Total Assets = Equity + Liabilities
909.09 = 696.39 + Liabilities
Liabilities = 909.09 - 696.39
Liabilites = 212.70
Debt to equity ratio = Debt / equity
Debt Equity ratio = 212.70 / 696.39
Debt equity ratio = 30.54%
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